Local market conditions may be a determining factor in offering rental concessions. In order to quickly fill a vacancy and/or be competitive with other rental properties in the area, landlords could offer financial incentives, attractive lease terms, or unit upgrades to attract new renters. For landlords with rental property in less desirable neighborhoods, a rental concession could attract renters who may not have otherwise considered the property.

Rental surveys in many markets show housing affordability is the most important criteria to renters when considering a move. A lease concession that allows the tenant to better manage his rent expenses will generate more interest than any other type of rental incentive.

Types of Incentives

The following types of incentives are some of the most common rental concessions.

Rent discount

A landlord could discount a rent rate as an incentive for a new tenant to sign a multi-year lease. However, if the tenant defaults on the lease by moving out before lease expiration date, a landlord has lost income by offering a rent concession as well as incurring an unexpected vacancy. A landlord should consider a lease clause that addresses tenant default on concession terms by stating what remedies will be taken to cure the default.

Free month of rent

For some tenants a lease concession of one month of free rent is a very attractive offering. However, a landlord should make sure his lease terms and conditions clearly state how this concession will be applied and what the renter must do to earn the concession. As example, the free month of rent may be earned once the tenant has paid full and timely rent for a specified number of months into the lease term.

Security Deposits

Offering a reduction in the security amount or a waiver of a security deposit may be used by larger rental complexes as a rental concession but is generally not a good business practice for an independent landlord. A security deposit is the landlord’s protection against a tenant’s property damage or unpaid rent. Waiving the deposit or allowing the tenant to pay less than one month rent could be a risky business practice.

A new tenant could request to pay the security deposit amount in monthly installments. This could indicate a cash flow problem and would usually not be considered a good business practice. However in some states, there are provisions by state statute that allow tenants to pay the security deposit in installments.

Unit upgrades

Improvements to the rental unit can be an attractive rental incentive for many tenants. Upgrades can be the landlord’s choice of certain upgrades or a tenant may be able to choose an upgrade from a list offered by the landlord.

Notification and Disclosure

A landlord should research whether state and local laws require notification and disclosure of tenant incentives or rental concessions before entering into a lease agreement.

Documentation

A landlord who provides a lease concession as a rental incentive should keep documentation of relevant information of the offer, acknowledgement, and delivery of the concession. An offer of a rental concession must be provided to eligible tenants in a fair and consistent manner to avoid claims of discrimination. It can be a best practice to keep records by date and detail of offers made, responses received and confirmed acceptances. The records should include a copy of the offer as published or communicated in any media including dates advertised, beginning and ending date of the offer and terms and conditions of the offer.

The lease agreement should include clear language regarding a concession, details of the terms and conditions to earn the concessions, and the available remedies if the terms and conditions are not met by the tenant.

A landlord does have valid concerns about dog bite liability. For some landlords, the liability concern can be a determining factor in a decision to allow pets on the rental property.

A dog bite victim’s medical costs are usually reimbursed through the dog owner’s homeowner insurance policy. When the dog owner is a renter and does not have adequate renter insurance coverage, the dog bite victim may choose to include the landlord as a defendant in a personal injury lawsuit. A landlord is perceived as having more assets and better insurance coverages than the typical tenant dog owner.

Generally, landlords are not automatically held liable for dog bites. However, landlords have a duty of care to take reasonable measures to ensure their tenants’ safety and security on the rental property. An incident of a dog bite injury requires investigation of the facts to determine whether the landlord performed to his duties and responsibilities for tenant safety.

Landlords can be held liable when their actions or their failure to act increases the risk for injury or damage from an aggressive or dangerous dog attack. A landlord could be held liable if the landlord had actual knowledge that the dog was dangerous or should have known that the dog was a threat to others. If the landlord did not have legal authority to remove the dog from the rental premises, the landlord must take appropriate actions for warnings of danger, as for example, by posting Beware of Dog signs on the rental premises.

For pet friendly rentals, the tenant should be required to acknowledge in a signed pet addendum that if the dog displays vicious, aggressive behavior towards others that constitutes a threat, or becomes a nuisance, the tenant must remove the dog from the rental premises. If the tenant failed to remedy the situation, the tenant breached the lease and is subject to legal action as detailed in the lease terms and conditions. If the landlord’s failure to enforce his lease terms and conditions for landlord removal of the dangerous dog, the landlord is negligent and could be held liable for any injury and damages.

If the landlord fails to maintain the rental premises to a safe condition which allows the tenant’s dog to escape the rental unit or rental property, and the dog bites someone, a landlord could be held liable for negligence if the landlord knew or should have known about a property defect or item needed repair. The landlord’s failure to maintain the property incurs liability for the injury even if the injury did not take place on property owned by the landlord.

Asking for feedback from tenants moving out can be a good business practice to help improve property operations. When departing tenants provide feedback, a landlord can use their responses to evaluate rental policies and practices to determine whether property operations need changes or additions. As an alternative to a discussion between landlord and tenant, the landlord could provide a printed form using a rating scale to indicate tenant satisfaction with maintenance/repairs, rent payment options, rental rules, amenities access/use, or other rental matters. The printed form could include a section for optional comments or suggestions for property improvements.

Questions that could provide feedback to improve business operations include:

Why is the tenant moving?

Many landlords track reasons for tenant move-out. Was the move-out due to family matters, opportunity for a better place or bigger place, a place with more amenities, or was it related to property management issues such as rent affordability, repairs and maintenance, neighbors/privacy, or noise/disturbance?

Is the tenant making a local move to another rental complex?

A local move to another rental complex may be an indication that the landlord’s unit/property is not competitive in terms of rents, amenities, features or policies. The tenant’s decision to move may be based on getting a better deal. If the landlord has not conducted a recent market study, the landlord may be missing the opportunity to attract and retain good tenants.

How did the tenant search for a new rental?

A landlord can use this information to evaluate his advertising plan and media strategies and accordingly make changes to improve his advertising effectiveness and coverage in the local area.

Did the tenant consider his rent to be a fair rent for the unit/area?

This response provides market information on rent affordability in the area and a comparison of the rental unit to similar units in the area.

Did the tenant express satisfaction with his rental experience during his tenancy?

The tenant’s answer provides direct feedback on property management and rental policies.

What would the tenant suggest for property upgrades and improvements?

Comments and suggestions could include physical property improvements as well as improving tenant customer services and response times.

Would the tenant rent from this landlord again?

The answer can be a confirmation of a satisfactory landlord tenant relationship or feedback to focus on areas that need attention.

With knowledge of an up-coming vacancy, a landlord can begin preparations to fill that vacancy. Before placing rental advertising, it is a good practice to review local market data trends, supply and demand, demographics, market rents, competition, and other conditions that affect local area renters’ consideration and choice for unit selection. A landlord should develop an effective advertising strategy to identify and attract potential renters willing to quickly move forward to application, selection, and tenancy.

The advertising process must be compliant with Fair Housing Act requirements for advertising rental property. There may be other requirements under state and local fair housing laws that will need to be included within the process.

Housing discrimination occurs when a landlord places an advertisement regarding the rental of any housing accommodation that indicates any preference or limitation based upon protected classes or characteristics.

Section 804(c) of the Fair Housing Act specifically makes it unlawful to make, print, or publish, (or cause to be made, printed, or published), any notice, statement, or advertisement, with respect to the sale or rental of a dwelling, that indicates any preference, limitation, or discrimination based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act.

Landlords must be attentive to how all forms of advertising, written and oral, are created and delivered to the rental market audience. Discriminatory advertising laws apply to the landlord’s use of brochures, flyers, leaflets, signs, posters, banners, TV and radio commercials, billboards, Internet-based advertising, or other conventional print ads in newspapers or magazines. What might be overlooked by a landlord in assessing his operations for potential fair housing violations are various other forms of advertising that make or print notices, statements, or advertisements used for communications by email or text, printed application forms and other rental documents, photographs of the property with tenants or potential tenants in the photos, illustrations in marketing materials or even signage and pictures in the rental office that could be construed as discriminatory against a protected class or characteristic.

Non-discriminatory advertising should advertise in an inclusive way that will attract the broadest possible audience, and avoid expressing any preference for or limitation against certain classes or characteristics.

In determining whether advertising constitutes a discriminatory housing practice, a “reasonable person” standard is applied by the courts. This standard means that liability is incurred by a person or entity if they make an advertisement that indicates a preference and that preference is readily apparent to an ordinary reader.

There are many different approaches to advertising rental properties. Many landlords have found through experience that there can be multiple advertising tactics that help to fill a vacancy. What works is usually conditioned upon a number of factors, i.e. local market, the landlord’s business model, and past history of advertising and marketing practices.

For some local markets a more defined advertising approach may be appropriate for the property and rental area. Word of mouth advertising and placing “For Rent” signs on the property are examples of a narrow, defined approach to advertising. It may take longer to fill a vacancy when using narrowly defined advertising methods. However, studies have shown that word of mouth advertising from existing tenants can be quite effective particularly in small regional markets. Word-of-mouth advertising can also come from referrals from family, co-workers, and friends in their communications with others in person or through social media.

While most advertising will eventually attract attention from potential renters, effective use of advertising can reduce vacancy down time and associated costs. Technology enables more efficient use of resources and provides an effective means to reach a larger and diverse market area.

Since many renters shop rental housing listings using mobile apps, rental listings that showcase property features and amenities with quality photographs of the property interior, exterior, and communal spaces generate more interest by viewers to visit the property either by virtual tour or physical showing.

The image quality of the photos, the number of photos, and the care taken to showcase relevant feature, amenities and floor plans, with detailed, accurate descriptions of the rental unit and the community are important factors in making the important first impression. First impression is a powerful decisioning factor for many prospective renters in the choice of a new home. A rental listing that provides the rental basics of the rental rate, relevant lease terms, tenant-friendly policies such as pet-friendly housing, parking/garage availability, and options such as “we offer virtual showings” allows the viewer to pre-screen his interest in the unit, his ability to qualify to minimum standards, and accordingly, make the call to learn more. Landlords that provide multiple channels of communication, such as options for phone, email, text messaging, and social media, make it easier for an interested prospective renter to ask questions or request a showing. It is important that the landlord be available to respond to inquiries in a timely manner. Prospective renters having begun a search for housing are more likely to consider renting from a landlord who tends to business and does not delay his response to inquiries.

Just as location, location, location of the rental property is a primary consideration for business viability, so is the placement of online rental listings on specific sites and apps. The “location” of the listing is important to be able to reach the largest possible market for the type, size, condition, and characteristics of the rental property. Most prospective renters use third-party listing apps or sites to search for available housing. Online rental listings can be posted to sites/apps such as Zillow, Trulia, Craigslist, Twitter, Facebook, Instagram, Pinterest, or other third-party rental property services.

Posting a virtual tour of the rental unit, or offering an open house tour using one-time access to view the unit can be effective means to show available units while being compliant with local and state regulations for health and safety reasons during social distancing and lockdown situations. A virtual showing using Face Time or Zoom for interested prospects can further qualify prospects into becoming applicants. The virtual forum offers opportunity for both landlord and prospect to ask/answer questions about the unit, rental terms, or the next step toward application and screening.

Whatever listing process is chosen to market the vacancy, a landlord should disclose in his listing, website, or in communication with a prospective renter the landlord’s rental process of filling vacancies, what screenings are required, lease terms and conditions, and other relevant information regarding fees, deposits, etc.

Although advertising violations can be found in some common rental practices, it should not be difficult to create a responsible ad that complies with fair housing laws if a landlord keeps these key points in mind:

• advertising should describe the property features and amenities, not characteristics of the ideal tenant;
• advertising should not express a preference for one personal characteristic over another;
• advertising should not exclude persons in protected classes; and
• advertising must be truthful in describing rental availability, rent, amenities, and features of a housing unit.

All advertising copy and information regarding responses should be kept for the period of time that complies with applicable document retention policies regarding the subject matter. By documenting the advertising process a landlord can determine what advertising method(s) may be most effective for his property under various market conditions. Additionally, documentation can help provide a defense against claims of discriminatory advertising policies.

The Fair Housing Act prohibits both intentional housing discrimination and housing practices that have an unjustified discriminatory effect because of race, national origin, color, sex, religion, disability, and familial status.

Certain policies or practices of a landlord could be regarded as fair housing discrimination against protected classes when a person with limited English proficiency applies for tenancy. A landlord’s policy or practice that contains language-related housing restrictions or that result in a language-based adverse action decision is a violation of the Fair Housing Act.

The Department of Housing and Urban Development (HUD) has published a Limited English Proficiency (LEP) guidance for landlords as an aid in renting to persons who as a result of national origin do not speak English as their primary language and who have a limited ability to speak, read, write, or understand English. The guidance addresses how the Fair Housing Act would apply to claims of housing discrimination brought by people with limited English proficiency.

People with limited English proficiency are not a protected class under the Fair Housing Act. However, national origin, which is a protected class, has been closely linked to the ability to communicate proficiently in English. The guidance points to statistical data supporting the nexus between limited English proficiency and national origin.

According to the guidance, nearly all LEP persons are limited in English proficiency because they or their family members are from non-English speaking countries. Housing decisions based on limited English proficiency are generally related to national origin or race.

National origin discrimination includes discrimination because an individual has the physical, cultural, or linguistic characteristics of individuals from a foreign geographical area. Courts have found a close link between language requirements and national origin discrimination.

The guidance addresses how various legal approaches, such as discriminatory effects and disparate treatment, apply in Fair Housing Act cases in which a housing-related decision – as an example, a landlord’s refusal to rent or renew a lease – involves a person’s limited ability to speak, read, write, or understand English.

Landlords are prohibited from using an applicant’s or a tenant’s limited English proficiency in a selective manner as basis for discriminatory actions or as an excuse or pretext for intentional housing discrimination. The law also prohibits landlords from using limited English proficiency in a way that causes an unjustified discriminatory effect.

Landlords may be liable for claims of intentional discrimination if their rental practices include advertising that contains blanket statements of language-related restrictions, such as “all tenants must speak English” or turning away all applicants who are not fluent in English.

Landlords should consider less discriminatory alternative practices for matters involving people with LEP, such as allowing an applicant or tenant a reasonable amount of time to have a document, such as a lease agreement, translated; providing written or oral translation services, using multi-lingual skills of staff members; or having an applicant or tenant bring another person or family member along to interpret documents or facilitate communications.

HUD has authority to charge landlords with violations of language-based discrimination or on behalf of the complainant refer the case to the Department of Justice. Landlords who violate the Fair Housing Act could be required to pay damages, civil penalties, and punitive damages to the complainant.

A warning notice, oral or written, may be appropriate for a tenant’s first time violation of a lease term or condition that is not a material default of the lease or a potential threat to neighbors or property. A tenant whose previous behaviors have never been a problem may be responsive to an oral request by the landlord to remedy the default. The landlord should document in writing the details of the landlord tenant-conversation regarding the lease violation and what the tenant must do to correct the violation.

A warning letter does not qualify as a formal termination notice. However, a written warning letter to the tenant does provide details of the tenant’s non-compliant behavior including date and time; citation of the specific lease term, condition, or rental rule that has been violated; the expected corrective action by the tenant to remedy the issue; and the consequences of failure to take corrective action for compliance.

For material violations of the lease a warning letter only serves to delay serving a formal notice to cure or quit. If a tenant has repeatedly violated terms and conditions of the lease, it is very likely a warning letter will not produce the desired change in the tenant’s behavior. If the situation involves dangerous behaviors such as criminal activity, drugs, or threats of violence, a landlord should immediately begin the termination process to end the tenancy.

Many tenant disputes with a landlord occur because of a breakdown in communication between landlord and tenant. There can be misunderstandings and misremembering of important rental policies and practices that can cause disputes over rents, deposits, repairs and maintenance, tenant privacy, and violations of lease terms and conditions.

Disputes are stressful, disruptive, and time consuming. The best way to handle a dispute is to avoid it by making sure the tenant understands the important rental policies and practices and what is expected from him during the tenancy. This is best done by reviewing lease terms and conditions during the new tenant move-in orientation and through ongoing tenant communications by various media such as tenant newsletters, reminder texts, or postings on tenant portals.

Your first step is to understand the situation by talking with your tenant to determine the nature and extent of the issue. You should keep an open mind and actively listen to the tenant’s side of the story. What does the tenant want? If you can determine what motivates your tenant, you may be able to reach agreement and settlement on the issue. Talking through the issue with the tenant will help you determine if it is a simple case of misunderstanding or if there is a larger issue involved that may require negotiation and settlement.

Review your lease agreement for relevant clauses regarding lease violations, warnings and notices, and remedies for resolution of defaults including legal actions that may be taken. A discussion of the appropriate lease clauses with the tenant may resolve the issue.

If you are unsuccessful in your negotiation and settlement talks, you may want to consider mediation. A mediator is an independent, neutral third party trained to help facilitate communication. The goal of mediation is to help parties work out their own solution to disputes. A mediator does not have authority to bind either landlord or tenant to an agreement. Either party is free to proceed with legal action if no compromise can be reached. Studies have shown however that those who agree to mediate their differences are more likely to be satisfied with the resolution that those who proceeded directly to court.

Also check your lease regarding language specifying that any disputes under the contract are to be settled by binding arbitration. You may have incorporated such language in your customized lease agreement. If you are using a generic rental agreement you may want to read it thoroughly for such language and act accordingly.

Arbitration is another non-judicial method of resolving disputes. An arbitrator is a neutral third party who reviews the case evidence and makes a final decision. Unlike mediation, the arbitrator has the authority to bind the parties to an enforceable decision. If the arbitration decision involves a money award and the losing party does not pay as required, the money award can be converted to a court judgment.

If a settlement is reached, it is important to document all details including signed written acknowledgment of the offer and acceptance by each party.

Alternatively, if the situation warrants it, you have the option to file a lawsuit against the tenant. Small claims court procedures are relatively simple and most landlords can easily represent themselves in court. However, it is usually advisable to be represented by an attorney if the tenant is using an attorney.

There is another consideration that could arise in landlord tenant disputes. If the tenant has exercised a legal right such as a complaint to a government agency, building or housing agency regarding code violations for health or safety, or has organized or become a member of a tenants’ union organization, any action taken by the landlord against the tenant is or is presumed to be retaliatory, which is a violation of state law. Retaliatory landlord action may take the form of raising the rent, reducing services to the tenant, or threatening to bring legal action for possession of the unit (eviction). Some states have an automatic presumption timeframe, ranging from 90 days to one year from the time of the tenant’s legal activity, during which a landlord’s action would be considered retaliatory.

However it may be that if the landlord can prove his action for possession is due to the tenant being in arrears for rent or that code violations are the tenant’s fault due to lack of reasonable care of the property, presumptive retaliation may not be applicable. To help avoid charges of retaliation you must accurately document the interactions you have with the tenant (e.g., repairs, complaints, or inspections), the type of action taken, and the date and time received/resolved.

Tenant turnover is costly. Tenant turnover of a quality tenant is even more costly and may be avoidable. Many landlords focus their efforts on attracting new tenants to fill a vacancy and allow existing leases to run their course. While not completing ignoring a current tenant, the landlord’s time and attention is directed to new tenant opportunities and potentially higher rents. The tenant with an expiring lease will receive landlord attention but at a date closer to lease termination. Some tenants by that time will have finalized their decision to seek new rental housing and, accordingly, have begun preparations for the move.

Why is tenant retention is so important? Tenant retention can help reduce one of the largest costs in property management – tenant turnover. A vacancy can negatively impact the landlord’s cash flow. Vacated units must inspected, cleaned, and made rent-ready for a new tenant. There are additional costs associated with the filling vacancy process, e.g., advertising, showings, applications, and screenings. Market conditions may further impact cash flow if a landlord must lower rent or offer concessions to stay competitive in the local market. There can be greater benefits to the landlord’s business by retaining the quality tenant who has performed to lease terms and conditions and, accordingly, has contributed to a positive impact on the business bottom line.

Not every tenant is a quality tenant. There are many reasons that leases are not renewed. Some tenants voluntarily choose to move on and some tenants just do not perform at a satisfactory level to warrant a renewal. A landlord must evaluate each tenancy on its own merit for consideration of renewal. Some relationships are better for business if the lease expires and a vacancy is created.

When a landlord performs to his rental standards in the filling vacancy process, he has expended significant resources to find and install a quality tenant. It may follow then, that as a complement to those initial efforts, a landlord should expend equal effort in the retention of that quality tenant. With higher tenant retention, a landlord could experience higher profits.

Well-developed tenant retention strategies can help minimize vacancies and reduce operating expenses.

What are some strategies to retain quality tenants? Generally there are three key factors that influence tenant retention strategies.

• The local market conditions
• The physical condition of the rental unit (maintenance and repair)
• The property management (quality of service)

Local Market Conditions

To stay competitive with area rental communities, a landlord must stay current with the local real estate market. Without that local market knowledge, a landlord has no idea if his business is competitive, can be competitive or clearly in need of a new business plan. A landlord could be losing potential renters from the applicant pool for reasons that could be easily remedied. Market knowledge of supply and demand, demographics, and rental trends are keys in business continuity.

A landlord must periodically review market rents. Renters do comparison shopping for rents in their desired neighborhood. If a landlord’s rents are higher than market rents, the landlord can lose business to his competition. If the landlord’s rents are less than market rents, the landlord could potentially attract a greater number of applicants but may not be able to qualify all applicants to rental standards. Lower rents can mean reduced cash flow and potentially negative consequences to business bottom line. As a general rule, rents are set at levels consistent with the market rent, i.e., the rent for comparable available units in the same area. Knowing the range of market rents also allows a landlord to determine how the current rent should be adjusted when considering lease renewals.

If the market research shows major differences in property amenities, the landlord should evaluate his property amenities to determine if amenities could be added or upgraded in a cost-effective manner. Amenities are usually a drawing point for tenants. It may be that with some changes, even relatively inexpensive ones, new tenants would be attracted to the properties and current residents would be more likely to renew their leases.

Property Condition

During his market research, a landlord must objectively evaluate the physical conditions of his properties as compared with the physical conditions of other landlord properties. A landlord may find that his properties need improvements or renovations to bring his properties to a more competitive market position.

Problems with maintenance and repairs can be a great motivation for tenants to move to another community. Certainly if maintenance issues were not adequately addressed in a timely manner during the tenancy, a tenant is not likely to be receptive to a lease renewal option. Despite having been timely in his rent payments, a good tenant may decide to move on to a better property when his lease expires.

For property values, and attracting and retaining quality tenants, property maintenance, repairs, and capital improvements are top priority in property management. Additionally with regular maintenance and repairs, the working life of property systems and structures can be extended. When vacancies do occur, the time required to return the rental unit to rent-ready condition can be shortened.

Maintaining rental properties to good condition, helping to retain that curb appeal that attracted tenants in the first place, can be an important factor in a tenant’s decision to accept an offer of lease renewal.

Property Management

Quality property management is all important in tenant choices for rental communities. A good property management team invested in customer service can be a significant factor in retaining tenants. Tenant retention depends in large part on the quality of communications between landlord and tenant. This simple strategy, being accessible and responsive to tenant requests, questions, and concerns, can keep tenants satisfied during the current tenancy and increase the likelihood of lease renewal.

Rental practices such as tenant screening have an impact on a tenant’s decision to renew a lease. Good tenants want to stay in good properties. They want to rely on management policies that screen for more good tenants. Tenant retention has been shown to be higher in properties where landlords conduct complete and comprehensive screenings for tenant selection.

Pricing rent fairly in relationship to market rents and property conditions will help tenants in their decision to accept a lease renewal offer. While tenants may understand prevailing market conditions and the fact that everything goes up can be a factor in setting rents, a landlord can increase rents incrementally to ease the burden on existing tenants. Being price-sensitive to the market may make the landlord’s rent structure more appealing to tenants shopping around and making price comparisons. A small increase in rent can be expected, a larger increase in rents can prompt a tenant to move. Discussion of rents and rent increase schedules including lease renewals can take place during the tenant’s move-in orientation. Detailed lease clauses can eliminate surprises at lease expiration notice periods.

Enforcement of rental terms and conditions is another way that landlords can retain quality tenants. If a landlord does not enforce consequences for lease defaults or allows dangerous conditions or illegal activities to occur on the rental property, quality tenants move on.

When properties in the local market are competitive for location, rents and amenities, a determining factor for a tenant to stay or move on may be the property management and its customer service. Tenants who feel their needs are being met, their privacy respected, and the property well maintained (a nice place to live) are more likely to want to renew their leases. The market’s perception of the landlord’s properties can be as important as the property’s physical characteristics and rental policies. Social media comments may influence a potential applicant’s decision in choosing a rental community. The branding of a property as a desirable rental community can be a decisioning factor to many tenants.

A good retention program is a landlord’s good will policy – responsive to tenant needs, open to communication, and appreciative of the tenant’s business.

Selecting the right tenant is a critical business decision. The landlord’s tenant screening policy and qualification standards form the basis for informed decisioning of tenant selection. A landlord develops his rental criteria to facilitate choosing the right tenant; a tenant able to pay rent on time and maintain the rental property to good condition.

The right screening policy and qualification standards help protect the landlord’s business against bad tenants. Bad tenants can result in loss of rents, property damage, evictions, unexpected turnover, extended vacancies, complaints, nuisance, threats to safety and welfare of others, and consequently, increased operational costs.

To develop compliant tenant screening policy and practices, a landlord must understand what can and cannot be done according to fair housing laws, landlord-tenant statutes, local ordinances, and applicable consumer protection laws.

A key issue for legal compliances is determining the applicable level of governance and the regulations, restrictions, or prohibitions at that level. Some metropolitan areas in certain states tightly govern rental housing screening policies. Due diligence of applicable laws is required to set compliance to the most stringent standard.

Landlord-Tenant Statutes

Landlord-tenant statutes cover rights and responsibilities of landlord and tenant. It is a landlord responsibility to stay current with applicable landlord-tenant laws on state and local levels. Local jurisdictions may have additional regulations governing landlord duties and responsibilities or could have more restrictive laws than required by state statutes.

Fair Housing Laws

The federal fair housing law prohibits discrimination based on the protected classes of race, color, national origin, religion, sex, disability, or familial status in most public, assisted, and private housing, with a few exceptions.

Some states and local jurisdictions may provide greater fair housing protections with additional categories of protected classes. Fair housing compliance must be in accordance with the most stringent requirements.

Disclosures

Tenant screening criteria set minimum requirements that are applied to all applicants equally and consistently. Disclosure of tenant screening criteria is important to provide transparency and openness in the selection process and provide a defense against claims of discrimination.

In some states or municipalities a landlord may be required to disclose to potential tenants in writing his tenant screening process and the tenant qualification criteria. A landlord must research his state statutes and local ordinances to determine his legal compliance requirements for disclosures.

Qualification Criteria

How to set the tenant screening policy and qualification standards begins with listing qualifications that must be met for acceptance of an application.

Formalized written rental screening and selection standards set out minimum qualification requirements for tenancy. Typically these requirements specify a minimum gross monthly income, a satisfactory income-to-rent ratio, verifiable current employment, positive references from previous landlords, satisfactory credit history and debt payment history, no history of illegal drugs or illegal activities, no derogatory public records such as bankruptcy, liens, or judgments, satisfactory background check, and in some cases personal references or qualified co-signer.

A landlord can select the tenant of choice as long as the selection decision is based on sound business criteria; all applicants have been screened in the same manner under the same criteria; and such criteria is applied consistently without discrimination in full compliance with all applicable federal, state, and local laws.

However there could be instances when business standards must be adjusted to changing market conditions or business model. Business standards can be revised, however, revisions should always be documented with the business necessity for such changes and the date the revision or addition became effective. A landlord must be sure the business criteria upon which the change is based is sound, legal, and is defensible against claims of discrimination.

The rental qualification criteria should point to the important issues of the landlord’s business – as examples, the ability to pay rent, an acceptable credit history, and verification of satisfactory previous landlord references.

Setting high standards can in theory help minimize the landlord’s risk exposure. However qualification standards that are too high can reduce the size of the applicant pool and extend vacancy periods. Rental standards should be objective, measurable, and relevant to an applicant’s performance as a tenant.

If any standard that is set, despite being neutral and non-discriminatory in its intentions, has a disproportionately adverse effect on any member of a protected class a landlord violates fair housing laws through a practice known as disparate impact.

Screenings

Most landlords agree that tenant screening is necessary to protect their business investment. Any screening, legally compliant and supported by valid business reasons, is beneficial in protecting the interests of people and property. What types of tenant screenings and types of delivery methods are independent business decisions typically based upon management experience and business need. The important key in tenant screening is consistency in methodology, criteria, analysis of data, evaluation, and selection regarding any and all rental applicants.

All screenings must be compliant with applicable federal, state, and local laws for anti-discrimination protections, consumer protections, and use of consumer reports. State landlord-tenant statutes may also regulate or restrict certain types of screenings. Landlords are held responsible to comply with applicable laws and ordinances.

It is important to develop a standardized compliant tenant screening process consistently applied to every applicant. With deviation from standards, a landlord opens his business to possible liability with claims of discrimination and unfair treatment of applicants. The best practice is fair, equitable, consistent, legal, and non-discriminatory qualification standards.

Pre-Screening

Documented screening policy and qualification standards allow for pre-screening of interested rental prospects inquiring about a vacancy. Pre-screening is a pre-qualifier to determine if there is sufficient interest on the part of the landlord and prospect to continue to the next phase of the application process.

Whether the initial contact is by phone or in person, it must not be used as a means to screen out prospects by asking leading questions or stereotyping prospects by language and speech patterns or by any other characteristic that is forbidden by federal, state, or local fair housing laws. Such practices are illegal.

The pre-screening process can be cost-effective in managing landlord time to fill a vacancy. A pre-screening interview with a rental prospect allows the landlord to communicate rental standards, qualification criteria, and basic property information. The pre-screening contact benefits rental prospects as well. Prospects can process the rental information to preliminarily determine their degree of interest in the offered vacancy and whether they want to proceed with the application process.

During the initial contact with a rental prospect, a landlord can provide information and ask questions that help the landlord understand the prospect’s rental interest, current situation and future housing plans. The prospect’s answers to a few qualifying questions can provide enough information to help the landlord to determine if there is a reasonable chance of qualification for tenancy. Some commonly asked questions are:

• Why are you moving?
• When is your planned move-in date?
• Are you able to meet the monthly income standard?
• Will you submit a rental application and consent to the standard application process including credit and background checks?
• Can you provide employment verification and proof of income?
• Can you provide previous landlord references?
• How many people will occupy the rental unit?

Using a prepared script and a checklist of property features will help ensure all prospects receive the same information in the same manner. Documentation of all contacts between the landlord and prospects should be done to help defend against potential claims of fair housing discrimination. Notation of the prospect’s responses may prove useful to later compare with information in his application form.

Documentation

Documentation is key to defending against charges of discrimination. Not only does documentation of rental policies and practices help refute false claims of discrimination or landlord negligence; it helps to “remind” both parties as the tenancy proceeds of what was said and done. Information may be misunderstood, memories may fail, or there might be misrepresentation of what was said. Without written documentation of policies, practices, forms, interviews, or other public contact, a landlord can create potential liability. Without the appropriate documentation and retention of documents, it will be the landlord’s word against a claimant’s allegation.

Document control is needed to secure associated rental/tenant documentation. There are legal requirements for the storage and security of rental documentation. This includes how it is stored and accessed; retention of documents; and disposal requirements of documents no longer needed.

Most lease agreements will contain a clause that prohibits repairs and alterations to the property by the tenant except as provided by law or as authorized by prior written consent of the landlord. Repairs and alterations to the rental property include rekeying locks or installing an alarm system without landlord consent. A sample lease clause may use language such as: “Tenant will not, without Landlord’s prior written approval, alter, rekey or install any locks to the rental premises or install or alter any security alarm system for the rental premises. Tenant must provide Landlord with a key or keys that unlock all such rekeyed locks or new locks. In addition, Tenant will provide Landlord with instructions on how to disarm any altered or newly installed security alarm systems. Tenant must provide Landlord with the name and phone number of the security alarm company.” The tenant should be reminded that the landlord must be able to gain access to the rental unit in the event of a true emergency.