Rental Applications
The rental application is one of many tenant screening tools to assess potential risk of lease default by an applicant. Risk assessment is an essential management practice in making an informed business decision to offer tenancy. A rental application is the most efficient means to gather preliminary information about a prospective tenant to begin the process of qualifying the applicant to rental standards.
Information requested on the application form should be relevant to business necessity. In screening an applicant for rental housing, with permissible purpose and under legal compliances, a landlord can request any information that would objectively point to the applicant’s ability to pay timely rent and comply with lease terms and conditions.
While the submitted application is an expression of the applicant’s interest in becoming a tenant, the application is non-binding on either landlord or applicant. A landlord is not obligated to offer tenancy to an applicant upon receipt of application nor is an applicant obligated to accept a landlord’s offer of tenancy during the application process. The application form is a source document to begin the process of filling a vacancy by qualifying rental applicants.
A well-developed application form makes it easier for the applicant to furnish information in an organized manner which in turn makes it easier for a landlord to analyze and evaluate applicant information for potential business risk.
The application form, customized to the landlord’s business operations, and vetted for legal compliance, must be used for every applicant. An application form provides a format to gather information and build an applicant profile. Whatever questions are asked on an application must be the questions asked of every applicant. There can be no selectivity or preferential treatment of one applicant over another applicant. The tenant screening process should be conducted in a non-discriminatory manner and in accordance with applicable laws.
There have been recent legislative actions by some states, cities and counties that have impacted tenant screening policies and practices. In those jurisdictions there are now state statutes and local ordinances that may limit, restrict, or prohibit certain tenant screenings at time of application or during the screening and selection process. A landlord will need to research current laws applicable to the state or city/county governing his rental property location to develop legally compliant screening practices and, accordingly, associated rental documents for qualification and screening.
Noting the above disclaimer for compliance with applicable regulations and requirements, most rental applications have a standardized format to capture and organize applicant information into categories.
An application requests basic information about the applicant, such as legal name, current address, cell phone number, email address, and identification verification information such as Social Security number and/or state driver’s license information. A landlord should research applicable laws regarding the disclosure of identification numbers and their use for tenant screening. A tenant screening services provider can provide information on what type of applicant information is required for submission to process tenant screening reports.
Other requested information on an application can include categories such as: rental history over the past 3-5 years with landlord name, contact information, and dates of tenancy; employment history including name of employer, contact information and verification of employment document; proof of income; financial accounts and balances; loan and installment contract obligations; rental references; personal references, designated emergency contact name and contact information; and applicant authorization and consent to obtain consumer reports, such as credit reports and background checks.
Note that when landlords use consumer reports to aid in tenant decisions such as applicant screenings, the federal Fair Credit Reporting Act (FCRA) obligates the landlord to certain regulated practices to ensure FCRA compliance for the protection, privacy, and accuracy of consumer personal information. This may include a separate notice and disclosure requirement for applicant authorization and consent per FCRA requirements. Due diligence by a landlord is required to determine what is needed to ensure compliance.
As the landlord conducts the review and analysis of application information, there is often the need to ask the applicant for additional information or to clarify information supplied on his application form. A landlord must be knowledgeable of fair housing laws to understand what questions are permissible and what questions are not. Questions that violate the rights of protected classes are illegal. Questions, even those asked in friendly conversation, may not stray into issues that are legally protected rights of applicants and tenants. Federal Fair Housing laws prohibit discrimination against the protected classes of race, religion, national origin, sex, color, familial status, or disability. State and local fair housing laws may have additional protected classes and thus be more stringent than federal law.
The application or an attachment to the application may also contain required landlord disclosures by state statute or local ordinance. Disclosures could be the landlord’s policy and practices for tenant screening and qualification criteria, standard rental policies, fees and deposits, utility responsibilities, or other property disclosures required by law.
The application form should also state that failure to provide all items of information requested or providing incomplete or inaccurate information are in themselves grounds for rejecting the application.
An important item on the application form is the signature line.The applicant’s signature on the application attests that all information provided by the applicant on the application form is truthful to the best of the applicant’s knowledge.
For liability protections and to further manage risk, a landlord should reserve a section on the application for management use only. This section can contain the date and time the application was received, the property address, the rent amount quoted, deposits and fees quoted, receipt of deposits and fees paid at time of application, unit availability date, and requested move-in date. With the applicant’s signature on the application, the document serves as confirmation of oral discussions regarding issues discussed at time of application or during a prior meeting. A landlord should not leave himself vulnerable to a misunderstanding of terms and conditions of tenancy or rely upon the memory of either party as to details of any discussion of move-in requirements. Additionally in a few jurisdictions a landlord is required to accept the first qualified applicant following a specified notification period. It is considered a better business practice for a landlord to select the first qualified applicant rather than the most qualified applicant to reduce the risk of a discrimination claim. Showing proof of date and time of application is a first in time practice that provides some protection from claims of discriminatory treatment.
The information collected from an applicant imposes responsibility on the landlord not only to use the information in accordance with all laws, but to also safeguard that information throughout the term of the tenancy and the required retention period following tenancy. At expiration of the required retention period or other applicable statutory requirements, the landlord must properly dispose of tenant records containing personally identifying information in a compliant manner as addressed by statute.
The value of the application form as a risk assessment tool may be overlooked in the filling vacancy process. Rather than rush through this initial screening, a landlord should carefully analyze the applicant’s information and as required, investigate further if red flag issues are discovered. The value of the application is also dependent upon the landlord’s due diligence and incorporation of laws into compliant rental policies, and practices. The application process properly conducted and documented can reduce the risk of claims of discrimination in the screening and selection of applicants. The signed rental application and the tenant screening results support the landlord’s decision to offer tenancy to the selected applicant.