The beginning of a new year is traditionally the time to evaluate current rental policies and practices for business and legal compliances.

This year the analysis and evaluation process may be a business necessity.

New landlord tenant legislation is scheduled to become effective this year in several states and many cities. Some of the new requirements may already be in effect, as new laws also often become effective on January 1^st.

As due diligence responsibility, a landlord must research legal requirements affecting the property’s location to make sure business policies and practices are in full compliance.

As of this writing, rent controls, tenant screening practices including use of credit reports, credit scores, criminal background checks, and eviction history, eviction proceedings, and security deposits are some of the legislative changes that have already been implemented or will become effective later this year. Many of these changes will have some effect on a landlord’s business policies and property management in those states and cities. Continuing the trend from last year, there are now more initiatives by cities, states, and tenant activist groups to provide for increased tenant protections as part of more inclusive rental housing decisions.

In evaluating current practices, a landlord should have a firm understanding of basic landlord tenant statutory requirements and the business necessity that is required for property operations. Even though experienced, a landlord cannot afford to take for granted that his property management is fully compliant without confirmation through legal research of applicable state, local, and federal laws.

Landlord-tenant laws serve as legal protections for landlords and tenants. Without defined standards and requirements, landlords or tenants could suffer business loss, or damage to persons and property. In some states, landlord-tenant regulations are more landlord-friendly, affording more protections to landlords as property owners. In other states, landlord-tenant regulations are more tenant-friendly, by providing tenant protections and remedies for housing deficiencies or unreasonable or illegal practices by a landlord.

Legislative Changes

Legislation at state and local levels can have significant impact on traditional rental housing policies for evaluating business risk through tenant screenings, selection standards, and rental policies. The following are examples of recent landlord-tenant legislation by cities and states. Information is provided for discussion purposes only and should be reviewed in context of the importance of landlord due diligence for business and legal compliances.

City Ordinances

Minneapolis, Minnesota

The City Council of Minneapolis, Minnesota has updated the city’s Renter Protection Ordinance. The updated ordinance regulates how landlords conduct tenant screenings of potential tenants. One of the provisions of the ordinance prohibits landlords from rejecting a potential tenant for having an insufficient credit score or insufficient credit history.

Historically a credit score has been regarded as an objective, measurable, and defensible method of evaluating financial risk to the landlord’s business. The applicant’s use of credit, credit payment history, and debt exposure were set out as indicators of future credit performance. The applicant’s creditworthiness was in practice judged by his credit history and/or credit score. Now, a Minneapolis landlord should examine his rental standards, and as necessary, revise standards to comply with the updated regulations. In some cases, a landlord will need to change his tenant screening policy and practices to remove qualification requirements for credit score and satisfactory credit history. The landlord must assess the potential financial risk of an applicant using various screenings that are in compliance with the ordinance.

Other provisions in the Renter Protection Ordinance forbid landlords from charging security deposits that exceed a single month’s rent; rejecting a potential tenant for any misdemeanor convictions older than 3 years and most felony convictions older than 7 years; and rejecting tenants for evictions older than 3 years. There are provisions for a landlord to reject applicants with convictions for certain crimes such as murder, kidnapping, criminal sexual conduct, etc., but only if those convictions were within the last 10 years. Landlords who use an individualized assessment process are allowed to reject applicants because of criminal record, credit score or eviction history. However, before rejecting an applicant, the landlord must first give the potential tenant the opportunity to provide supplemental information about the nature and severity of the potentially disqualifying behavior. If the landlord still wants to reject the applicant after considering the supplemental information, the landlord must provide written reason for denying the application and a copy of the document must be filed with the city.

Portland, Oregon

The Portland City Council has issued a mandate that renters in the Portland city limits who are served a no-cause eviction or any of the following triggering events must be paid Relocation Assistance by their landlord. Those events include:

• a no-cause eviction, or
• a qualified landlord reason for termination, or
• a rent increase of 10 percent or higher over a 12-month period, or
• a material change in the lease terms, or
• a renter receives no option to renew their lease.

Tenants must receive a written notice for any of these events at least 90 days prior to the effective date, including a description of their rights and obligations and the amount of the Relocation Assistance they are eligible to receive.

Seattle, Washington

The Seattle City Council has passed 5 new tenant protection laws, including new protections for domestic violence survivors from being held liable for damages to a rental unit that were caused by their abuser.

Additionally, to strengthen renter protections:

• landlords are prohibited from restricting legal occupancy limits established by local, state or federal laws (aka the “roommate bill”) allowing tenants to share the costs of rent and other benefits of shared occupancy;
• information on the rights and resources of tenants is required to be included on notices to terminate a tenancy, increase rent or for landlord entry to a unit;
• authorized enforcement of compliance to state law requires landlords to provide receipts for rental payments and prohibit the requirement for electronic payments only; and
• landlords are required to register the rental unit with the appropriate governing agency before filing and issuing an unlawful detainer to terminate a tenancy.

Kansas City, Missouri

The Kansas City Council has passed a tenants bill of rights package. The tenant rights package includes two pieces of legislation. The first part cites local, state and federal law and provides a list of rights already afforded to tenants, including rights to habitability, freedom from discrimination and retaliation, and the right to organize and collectively bargain. The second part of the ordinance requires that landlords give 24 hours’ notice before entering properties and provide tenants with a means to get a utility estimate for the property. Landlords are also required to provide a copy of the bill of rights. The ordinance also bars discrimination against prospective tenants solely because of a prior arrest, conviction or eviction.

State Legislation

Illinois

The state of Illinois has passed a new law preventing landlords from evicting, retaliating, or threatening to take action against undocumented immigrant tenants who report code violations or make requests for maintenance. Illinois was the second state after California to pass such a law.

New York

The state of New York passed the Housing Stability and Tenant Protection Act of 2019, called the strongest law protecting tenants in the state’s history that established stronger tenant protections statewide. Landlords cannot evict or otherwise penalize tenants for making good faith complaints to the landlord about violations of the warranty of habitability. Security deposits are limited to one month‘s rent and landlords must give tenants the opportunity for a walk-through before they move-in and before the tenant moves out. The security deposit must be returned within 14 days with an itemized list of deductions. The eviction process was changed to provide new rights in eviction court.

Washington

The state of Washington’s Landlord Tenant and Eviction laws had major changes in 2019 that included a landlord’s mandatory use of the 14 day Notice to Pay or Vacate (previously landlords used a 3 day notice requirement). If a tenant is a day late in rent, a landlord must give the tenant 14 days to pay rent before the landlord can file an eviction lawsuit. Tenants cannot be evicted for not paying charges that aren’t actually “rent”. A landlord must apply the tenant’s rent payment first toward rent before applying the payment to other kinds of non-rent such as late fees. A landlord is required to provide at least 60 days’ notice in advance for a rent increase (previously only a 30 day notice was required).

California

The state of California passed the Tenant Protection Act of 2019 which has a number of changes for residential properties regarding rent control and eviction protections. The law took effect on January 1, 2020, with some of its changes implemented over several months during a transition phase. The Tenant Protection Act of 2019 extends a rent cap and eviction control to the entire state where rent control does not already exist. Full discussion of the Tenant Protection Act is beyond the scope of this article. California landlords are advised to conduct due diligence on the Act, seek legal consultation as required and implement their rental policies accordingly.

The tenant screenings a landlord conducts are important risk assessment tools for business profitability and asset protection. Screening requirements are regulated by legal compliances and business necessity. Tenant screenings relevant to business standards provide key data to evaluate an applicant for potential business risk. With recently passed legislature by some states and local governments, there are now additional restrictions and prohibitions regarding the use of tenant screenings in rental housing decisions.

While the timing and scope of tenant screening practices are changing in different  localities, the need for tenant screening remains strong in order to protect the landlord’s business and the safety of his tenants in residence.  A landlord will need to correctly understand how such restrictions or prohibitions affect his business and make adjustments in his practices accordingly. To maintain legal compliances, a landlord must incorporate full due diligence as an ongoing risk management practice for his property locations.

One example of new regulations in tenant screening policies and practices is the City Council of Minneapolis, Minnesota approval of an update to the city’s Renter Protection Ordinance. The updated ordinance regulates how landlords conduct tenant screenings of potential tenants. One of the provisions of the ordinance prohibits landlords from rejecting a potential tenant for having an insufficient credit score or insufficient credit history.

Historically a landlord has looked to the consumer credit report as the key document for measurement of an applicant’s qualifications to rental standards. A credit score has been regarded as an objective, measurable, and defensible method of evaluating financial risk to the landlord’s business. The applicant’s use of credit, credit payment history, and debt exposure were set out as indicators of future credit performance. The applicant’s creditworthiness was in practice judged by his credit history and/or credit score. Now, in Minneapolis a landlord should re-examine his rental standards, and as necessary, revise standards to comply with the updated regulations. In some cases, a landlord will need to change his tenant screening policy and practices to remove qualification requirements for credit score and satisfactory credit history. The landlord must assess the potential financial risk of an applicant using various screenings that are in compliance with the ordinance.

A credit score or credit report are not the only screenings available to the landlord for decision making. The landlord retains his ability to operate his business to select a tenant who meets rental qualifications as long as the landlord’s rental standards are legal, non-discriminatory, and applied to all rental prospects, applicants, and tenants. The landlord will control the means and methods of screening potential tenants by choosing legal appropriate screening measures to evaluate applicant qualifications to business standards.

A landlord protects his business by analyzing business risks and implementing practices that reduce risk. The risk of missed rent or late rents is a concern to most landlords.  To reduce problems associated with rent defaults, a landlord can screen an applicant for the ability and willingness as a tenant to meet rent obligations. Financial ability and satisfactory credit management is at the center of applicant qualification and approval for tenancy. An important determination in setting business policies is how best to evaluate this requirement. In the past a landlord may have based a housing decision on the applicant’s credit history and/or score. Now a landlord must evaluate screening practices that can collect the type of information to qualify an applicant to rental standards for income and employment that allow an applicant to meet rent, as well as reference sources to confirm payment history of the applicant in his willingness to make rent payment a priority. Consumer credit reports are still a valuable resource and provide critical data for financial analysis and evaluation. The information in the credit report should be considered in context of the source and reporting period of contributing creditors, not as an absolute indication of credit worthiness.

The issue of missed or late rents can raise another concern for landlords. The lease agreement sets out the legal contract terms and conditions for both landlord and tenant. The tenant by signing his lease has agreed to meet contractual obligations for full and timely rents. If the tenant defaults on this material term, what other lease terms and conditions may fall to default? Screening for ability to pay and willingness to pay should be backed up by the applicant’s management of his resources to meet credit responsibilities. There should be adequate history of the applicant’s commitment to meet his financial duties and obligations.

This is an area where the applicant’s credit report can supply information by listing open and closed accounts, the type of credit, the total amount of loans, balances due, and payment history. Additionally a credit report will list any accounts sent for collection or write off.

Financial ability to pay rent can come from various sources of income. Wage earnings are the most common source of income. Proof of current employment and wages or salary income for applicants can be verified by the applicant providing copies of the last several paycheck stubs, and the landlord’s direct confirmation of the applicant’s employment status by a written document from the current employer or as documented in a telephone conversation.

Self-employed individuals can provide copies of previously filed tax returns, or copies of the IRS Form 1099- Miscellaneous as documentation of their earnings. An applicant whose income comes from commissions or incentives will need to provide the landlord with copies of appropriate documents that support the sources of income. A landlord may need to review copies of tax returns, bank statements, 1099s, or other supporting documents for verification purposes.

Verification of non-earned income, such as interest, dividends, annuities, Social Security or disability benefits, IRA/401(k) pension distributions, other retirement plan distributions, court-ordered agreements for spousal support, child support or as awarded by lawsuits, and other investment cash flow and entitlement items, may be verified through copies of official statements available to the applicant.

In general, a landlord can request whatever financial information is required to confirm the applicant’s ability to pay under the landlord’s legal, business supported rental criteria, provided the same financial information is requested from all applicants.

Renters who meet their financial obligations will have a record of timely payment. The credit report provides summary data of payment history. Additionally landlords can contact rental references to confirm the renter paid as agreed while a tenant at former rental address. Credit references can be contacted for those creditors who have extended credit or otherwise established a financial relationship with the renter but who do not report payments or payment history to the major credit reporting bureaus.

When an applicant has an insufficient credit history or credit score, it can be as a result of a  voluntary lifestyle decision to not utilize credit or that credit has not yet been established over a sufficient period of time to generate a credit history, a landlord must determine how best to evaluate his qualifications to rental standards.

Many landlords have experience in evaluating applicants with thin credit files or otherwise appear to be credit invisible to credit reporting bureaus. Those landlords have found that an applicant considered credit invisible may actually have a strong history of debt repayment according to terms and conditions of non-reporting creditors. Being invisible does not mean an applicant is not credit worthy. An applicant whose credit report file comes back as thin is not automatically a person who has made poor credit decisions and missed payments. In some ways a thin file applicant is credit neutral. Some applicants – whether their credit file is visible, invisible, or thin – are credit worthy, while others are not.

An applicant interview is a screening tool that can also provide information about credit usage and money management. The interview allows the applicant to tell his story and explain how he manages his financial obligations, i.e., pays his bills. The landlord has the opportunity to ask the applicant questions that clarify information on the application form or as furnished by references from the employer, previous housing providers, and credit references.

Additionally a landlord should be knowledgeable of legal requirements in some jurisdictions and in certain circumstances for individualized assessment of the applicant’s background history, including criminal, eviction, and credit history.

The terms and conditions for tenancy are set by the landlord. The landlord has the right to offer conditional approval for tenancy such as requiring a co-signer or different lease terms. The above discussion can serve as an example to landlords of changing rules and regulation of landlord-tenant issues and the need to monitor such changes and adjust as necessary for compliances. Tenant screenings are comprised of various types of verifications and fact checking that contributes to the final decision to offer tenancy.

The restrictions and prohibitions made by the Minneapolis City Council change tenant screening practices in that jurisdiction. Landlords are always required to review practices, revise practices as necessary and comply with current legal requirements. The process of tenant selection decisioning remains the landlord’s business decision. Proponents of the ordinance view the new changes as tenant protections to make the screening process a more inclusive process. The new tenant screening regulations are effective in June 2020 for landlords who own 15 or more rental units. Landlords with fewer rental units have until December 2020 to comply with the new regulations.

Note: Landlords are cautioned that information, as presented in this article, is for discussion purposes only and should not be construed as legal writings, or as legal advice. The topic of discussion, however, is representative of some the changes in landlord-tenant issues that are effective this coming year; that are being proposed for future consideration; or that are pending in the next state and local legislative sessions.

Setting the right amount of rent isn’t necessarily easy. It can be trial and error to find the right rent for your properties for your market. For comparison purposes at least three properties similar in size, features, and amenities in your local area should be used to determine a market rate.

Setting the rent much above the market rent can mean there are fewer applicants that respond to your advertised vacancy. Renters searching for a new rental can very quickly determine the value of a given type of unit in a particular area. For many tenants, a rent that is even a small percentage above market rent will eliminate that unit from their consideration. Fewer applicants mean a reduced pool of screened prospects from which to select a tenant. To fill the vacancy you might need to modify your rental standards or accept the possibility of an extended vacancy period.

Lower than market rent could mean reduced cash flow, perhaps a negative cash flow. However a slightly lower than market rent could also result in filling a vacancy sooner and help offset reduced monthly revenue.

There are many factors that influence market conditions and, accordingly, rent rates. Rent rates vary from area to area, location to location within an area, and market supply and demand. Influences such as the location of the property, the condition of the property, its amenities and upgrades, along with unit size and floor plans can attract the attention of renters looking for new housing.

The decision to retain a tenant or to allow lease expiration is not always an easy decision particularly when the current tenant has been a good tenant.

If you have analyzed market rents, you must have a rent amount in mind that you find acceptable for your business operations and are fairly confident that your applicant pool could support that amount. If these tenants are the good tenants that you would want to keep, why not make your renewal offer to them contingent on accepting the new rent amount (market rent). If they are agreeable or you can reach an acceptable compromise with them, you have avoided a perhaps unnecessary vacancy and its costs.

Keeping a current tenant by renewing the lease can simplify property management. Doing so is often not cost effective – landlords should do the calculations regarding the total cost of preparing the the vacant unit for a new tenant, including the potential longer vacancy period due to the higher rent; what that means regarding the increased rent needed from a new tenant who may not stay more than the initial lease term; and whether the rental market currently supports such a higher rent. Renewing a lease avoids the time consuming process of finding and qualifying a new tenant, and eliminates the costs of cleaning and updating a vacant unit.

Keep in mind that a move-out is costly for tenants as well. If the new rent is reasonable, tenants usually want to stay rather starting over with a new property and a new landlord.

However, while the option of offering lease renewal to the current tenants could make rental operations a little easier, there are several issues associated with a lease renewal that should be considered before you offer renewal or decide to market to a new tenant.

While your current tenants may have paid rent on time, been a good neighbor, and otherwise adhered to rental rules, you should conduct a property inspection to determine that the rental unit is being properly maintained by the tenants and their housekeeping is at an acceptable standard before offering a lease renewal. If the tenants have not fulfilled their maintenance responsibilities and the unit is not in good condition, you would not want to renew the lease and allow future potential damage to the property.

Many fixed term lease agreements are for a term of one year. A tenant who qualified under your rental standards a year ago may have had a change in his ability to meet your current qualification criteria. While many landlords require a tenant to requalify to current standards for a renewal of lease, you may be familiar with your tenants’ situation and confident that your tenants will continue to meet their rental obligations. You should always evaluate the potential financial risk of any tenant while being knowledgeable of applicable state or local laws regarding the use of credit reports in screenings. As a general consideration, if tenant screening is legally permissible, a credit rescreening of the tenants could be compared to the tenants’ credit screening at application. If there is significant difference in income to debt ratios, you may want to consider a renewal with conditions, e.g., an increase in the security deposit.

A lease renewal decision may be influenced by local area market conditions and the market position of your property. Starting over with a new tenant may allow for increased rents but there is potential for financial risk from applicants with unknown rental histories. With a lease renewal you at least have a rental history record to support your decision.

There may be other reasons that despite being good tenants you may not want to retain them as tenants. You still need to do market analysis to determine how to best market your property to attract new tenants.

The most common rental scams are identity theft and fictitious identities. Identity theft is fraud that occurs when an individual’s personal information is used without their knowledge by another individual to commit a criminal act. An applicant may use bits and pieces of the identity theft victim’s personal information, such as the victim’s true name, date of birth, or Social Security number, as well as his own information on the rental application. The applicant may be approved for tenancy based upon the qualifications of the identity theft victim. Using a variety of screenings and reference checking can help catch obvious discrepancies or red flags that need to be investigated.

Manufactured identities are fictitious identities created through the use of digital fraud. If you approve the applicant who is using a false name and background, as a tenant, he has the means to use your housing decision as a reference in obtaining credit or to commit other fraud. The tenant’s fraud may not be discovered until the tenancy is well along and may only be discovered if there is a material default of the lease.

If you use online rental applications, you should be particularly careful to verify the identity of the applicant. You will want to meet the applicant in person to review his application. An online application provides a level of anonymity that can create problems for a landlord since you would no way of knowing how the application was completed.

The simplest steps to help avoid business loss from rental scams is to recognize fraudulent behaviors, be alert to red flag issues, and thoroughly vet applicants throughout the application and interview process. Discrepancies, omissions or inconsistencies in information in the application itself, or as discovered during applicant interviews, or as revealed in reference verifications can help you identify red flag issues.

The timing of the investigation and verification process is critical to identify fraud before accepting the applicant to be your tenant. Once a tenant is installed, you must use the legal system to evict the tenant from the property and regain possession of your rental unit, which may take several months and be at great expense.

A landlord has the right to set rules and regulations for his rental property.

The landlord’s rules and regulations, often referred to as the “house rules”, are in addition to the lease agreement terms and conditions. The house rules and regulations may be incorporated into the lease agreement or provided as a separate lease addendum. The signed lease and lease addendum legally bind the tenant to the landlord’s terms and conditions, rules and regulations during the period of the lease term.

House rules and regulations control the use of a rental property, its amenities, buildings, equipment, and common areas, for the benefit of the tenants’ safety, security, welfare, convenience, and enjoyment of the rental units; help protect the landlord’s property from damage and misuse; and ensure fair distribution of services and amenities to all tenants. Rules must be reasonably related to the purpose for which they were developed. House rules cannot be used for the purpose of the landlord evading his legal duties and obligations, nor can a landlord use house rules to deny tenant rights. The landlord’s house rules must apply to all tenants in a non-discriminatory manner.

The house rules provide the tenant with the landlord’s expectations of the standard of conduct required for living at the rental property. The tenant has the duty to perform to lease terms and conditions as agreed. Clearly established rules in language that a tenant readily understands provides the guidance and structure for compliance – what the tenant is required to do and what the tenant cannot do. The rules help to minimize confusion or misunderstanding of policies for day-to-day living requirements such as housekeeping duties and safety and security rules.

Most commonly a landlord will include a clause in his lease agreement that references an attached lease addendum for the landlord rules and regulations. The language in the lease clause may be similar to the following: “Landlord reserves the right to establish and change from time to time his rules and regulations he deems appropriate for the common use and benefit of all tenants with proper notification to Tenant. Tenant shall comply with such rules and regulations as uniformly enforced in a non-discriminatory manner. Tenant has read and acknowledges receipt of the rules and regulation. Tenant understands material violations of rules and regulations may be grounds for termination of lease.  In the event of a conflict between the rules and regulations and the express terms of the Lease, the Lease terms shall prevail.”

House rules and regulations are usually detailed in language and scope in order to provide greater protection to current residents and the rental premises. Rules and regulations provide information and instructions to tenants on rental policies covering such matters as:

• Rents
• Landlord Entry to rental premises
• Quiet Hours
• Noise and Disturbance
• Waste and Negligence
• Guest Stays
• Pets Policy
• Maintenance and Repair responsibility
• Keys and Lock-out policy
• Housekeeping Standards
• Trash and Garbage disposal
• Vehicle Registration
• Parking Regulations
• Smoking Policy
• Use of common areas
• Services and Amenities

Provisions for Rule Changes

Minor Changes

A landlord may want to make changes to his house rules. Proper notice to tenants of a minor change in policy or practice usually requires a 15 or 30 day advance notification of change. A landlord would need to research state statutes to determine if a different notice period is required. A minor rule change would be a change that does not affect the tenant’s use and enjoyment of the rental premises or the agreed upon services and amenities at the time of his lease signing. As an example, a minor change might be a change in the access hours to the laundry facilities on premise. A notification period allows tenants to become used to the new rule.

Major Changes

For a fixed term lease, if the landlord wants to make major changes to the house rules that will affect the terms and conditions of the tenant’s lease agreement, such as changing the way(s) that the tenant has enjoyed living at the property by reducing services, interfering with the tenant’s right to quiet enjoyment of the rental property or that materially affect the tenant’s financial situation such as an increase in rents, a landlord cannot implement that change unless a tenant agrees in writing to the change through a signed lease addendum or the current lease agreement expires.

When a major change to lease terms and conditions is requested, a tenant has a choice to accept the change, refuse the change, or negotiate with landlord for possible alternative terms and conditions. If the tenant doesn’t sign the lease amendment, the amendment cannot go into effect. The landlord has no choice but to wait for the end of the tenant’s lease term and implement the change upon a renewal of the lease or a new tenant is installed.

Major changes such as rent increases or reductions in services or amenities have a significant impact on tenant decisioning to accept an offer of tenancy. Had the higher rent or fewer services been the offer in place when the current tenant signed his lease, the tenant might have decided to look for different rental housing. A landlord cannot arbitrarily change the tenant’s lease terms and conditions.

For a month-to-month rental agreement, a landlord must provide notice to the tenant of the proposed change, generally a 30 day notice period. State statutes may differ in the notification period requirements.

Renewal of Lease

A landlord can implement rule changes when a tenant’s lease agreement expires. If the tenant wishes to renew a lease when his current lease expires, the lease terms and conditions in effect at that time will be the terms and conditions of the tenant’s renewal lease. A landlord knowing that he wants to make major changes in lease terms and conditions should give adequate notice to a tenant whose lease will soon expire. The tenant should be allowed time to analyze the changing terms and conditions to decide whether to renew or not.

Safety and Security Reasons

However if a rule should be changed for safety and security reasons to protect tenants, a landlord may want to provide for that event by including in his lease a clause that waives the customary notification period and allows immediate implementation of the change in rules. Notification to the tenants would still be required that documents the reason and the need for the immediate change in rules.

New Tenant

A landlord can make new rules or major changes to existing house rules that will be the lease terms and conditions for a new tenant accepting tenancy.

There is difference between an application deposit and an application fee. While the terms seem similar, they cover different issues. .An application fee is almost always charged for application processing but an application deposit is collected only in specific circumstances.

If a landlord collects an application deposit to hold a rental unit for an applicant, a refund of the application deposit will usually depend upon the circumstances of the matter including landlord-tenant statutes, the landlord’s written policies, and the language in the deposit/hold agreement.

If a landlord charges an application processing fee to conduct tenant screenings, including landlord analysis and evaluation of applicant qualifications, an application fee is considered non-refundable. This is generally true even if the applicant is rejected by the landlord. Once the tenant screening process has been initiated, the application fee becomes the landlord’s business funds.  If an applicant qualifies to standards and is offered tenancy but declines the landlord’s offer, the application fee is not refundable.

A potential applicant should clarify with the landlord the details of the application process and the terms and conditions of the screening process including fees. Once known, the potential applicant can decide if he has sufficient interest to apply for the rental and be tenant screened. There may be fine print in the application form that could make a difference in his decision to apply.

In some states landlords are required by statute to provide potential applicants with written notice of rental eligibility criteria to ensure applicants know what is expected and can self-elect to apply for a rental. If a potential applicant knows he would not or could not qualify to rental standards, there would be no need to apply and forfeit the application fee.

An application deposit to hold a rental unit can be collected in addition to the application fee. When the landlord holds the rental unit with a deposit from only one applicant, it is off the market and unavailable to other qualified prospective tenants who may have to be turned away. If the applicant later changes his mind and doesn’t accept the rental offer, the landlord may have suffered financial harm through lost business opportunity. In such a case, the landlord may have justifiable reason to retain all or part of the holding deposit.

If an application/hold deposit is collected, there should be a signed written agreement that unambiguously defines the terms of the deposit including the terms and conditions regarding acceptance or rejection of the applicant and whether a refund, full or partial, of the application deposit will be made according to the facts of the matter.

No, an applicant by signing the rental application does not create a binding agreement between himself and the landlord offering a rental unit. While an application is required by a landlord to begin the screening process, an application is not a legal document and therefore is not a contract between landlord and applicant. An applicant signifies his interest in the landlord’s offering of an available rental unit by submitting an application. However, a landlord is not obligated to offer tenancy to an applicant upon application submission nor is an applicant obligated to accept a landlord’s offer of tenancy after processing the application. The applicant in signing the application is asserting that his information is truthful and accurate.

A rental application allows a landlord to collect and organize applicant supplied information relevant to qualifying the applicant for rental housing.  A landlord can request any business related information that would objectively point to the applicant’s ability to pay timely rent and comply with lease terms and conditions.

The format of a rental application is a business decision by the landlord. Determining which format to use can depend upon a landlord’s preference, the resources available to his business operations, and the market being served.

Paper applications and online applications can be equally effective, cost efficient methods to capture information for screening purposes provided there has been due diligence in the development and implementation of an application “form.”

When the same information is requested of every applicant, the same screenings are conducted on every applicant, and the same analysis performed to evaluate applicant screening reports, the type of media used to collect the required information may be only a matter of landlord preference. However, there can be no preference in the application and screening process itself. All rental practices must be non-discriminatory and legally compliant.

A rental application in paper form is the traditional format used by many landlords to begin tenant screening. There are some perceived benefits in using paper applications. The paper format is familiar to most potential renters; an application can be completed in the rental office after a showing; a paper supply is easily sourced; a paper document does not require computer skills or access to the Internet for completion and submission; paper forms appeal to a traditional rental market pool; paper applications provide ready documentation for legal compliances; and signed applications aid in defense of potential claims of discrimination and unfair treatment. The landlord is present at the time of application to verify applicant identity and answer general rental questions. On the other hand, paper applications require safe and secure handling, storage, and final disposal per legal guidelines. Access to application forms should be restricted to business purpose and forms secured for privacy requirements. A landlord will need to anticipate that some forms will be turned in with missing or incomplete information or the information may be hard to read due to handwriting illegibility. This will require additional time to be spent in clarification of information or require additional information to be provided by the applicant.

An online application process accessed through a landlord’s rental portal may appeal to certain demographic portions of the rental market. The application process can be initiated at the applicant’s time of choosing from a mobile device thereby making it easy for the applicant to apply for the rental. This is an effective method for those potential renters searching multiple rental offerings or their preferred method of doing business. The issue of incomplete or missing fields of data is remedied by the application program requiring all critical fields be completed before submission for processing. With the applicant e-signature consent to begin tenant screening, the process of qualification can immediately begin and results returned in a shorter timeframe. With potentially quicker turnarounds on reports, rental decisioning can be faster and vacancy downtime reduced. Applications are processed according to date and time submitted reducing potential claims of discriminatory treatment of submissions. A landlord will still be responsible for legal compliances, safeguarding of applicant information, and retrieval and handling of electronic files as required for business compliances.

Whichever format a landlord chooses to collect applicant information, the rental application is an important risk assessment tool, and can help reduce potential claims of discrimination in screening and selection of applicants. As documented in writing or electronic form, the signed rental application and the tenant screening results support the landlord’s decision to offer tenancy to the selected applicant.