A lease may be terminated for a variety of reasons. The process of terminating a lease requires landlord and tenant to follow certain procedures to ensure the termination is conducted in a legally compliant manner.

The contractual relationship of landlord and tenant is a binding agreement between the two parties detailing the lease terms and conditions during a specified period of time. The lease imposes duties and obligations on each party by statute and the lease terms. Primary among these duties and obligations is the obligation of the landlord  to maintain the rental premises in a safe and habitable manner during the term of the lease and the obligation of the tenant to pay rent during his tenancy as agreed.

Fixed-term Lease Agreement

A fixed-term lease agreement may be  the most common rental agreement between landlord and tenant. A fixed-term lease obligates landlord and tenant to a set period of time for tenancy, i.e., has a designated start date and end date. The fixed-term lease automatically terminates at the specified end date unless the lease agreement provides other options.

During a fixed-term lease, a landlord cannot raise the rent or change other rules, terms, and conditions of the lease unless the lease provides for such future changes and the tenant agrees to the lease modification in writing.

A landlord is not required to extend renewal terms to a tenant nearing the expiration date of his current lease nor is a tenant obligated to accept a renewal offer.

Periodic Rental Agreement

A periodic rental agreement, typically a month-to-month agreement, provides lease terms and conditions for a shorter period of time, and renews automatically at the end of that specified  period unless landlord or tenant give the proper amount of written notice to terminate as required by statute or the rental agreement. With proper notice to the tenant,  a landlord can change the rent or other terms and conditions of tenancy.

Due Diligence

The landlord must conduct due diligence for state and local regulations for lease termination including  notices, notice periods, and other requirements per statute and  ordinance. The lease agreement must be compliant with all statutory requirements.

End of Lease Term

Generally neither landlord nor tenant may end a fixed-term lease unless there is cause, such as a  violation of lease terms by one of the parties. The fixed-term lease simply ends of its own accord on the expiration date set by the lease. At that time the tenant is expected to move out, sign a renewal lease, or convert to a month-to-month tenancy with the landlord’s approval.

As noted above, the periodic agreement continues until proper termination notice is given by either landlord or tenant.

Lease Terminations

Lease Default

For a fixed-term lease, a landlord cannot remove tenants from the rental premises or terminate the lease before the set expiration date unless there is tenant violation of the lease terms. As examples, lease default by a tenant could be:

• Material rent default – habitual missed rent, late rent, partial payments,
• Property damage – intentional damage, negligent use,
• Unauthorized occupants in rental unit,
• Repeated violations of rental rules, terms, conditions – e.g., violation of no pets policy, noise and disturbance issues, violation of guest policy,
• False or misleading information provided to the landlord for tenancy,
• Violation of health and safety standards for sanitary conditions at rental unit, or
• Illegal use of property, criminal activity, danger posed to others.

To terminate a lease, the landlord must follow the statute requirements of the state where the rental property is located. While each state may vary in requirements for lease termination, commonly, statutes require landlords to notify tenants of the intent to terminate a tenancy. Some states allow tenants the opportunity to cure a lease violation before the landlord can take further action for lease termination; while other states allow a landlord to terminate a tenancy without giving the tenant a second chance to cure the violation.

Notices commonly used for notification of intent to terminate a lease are

• Pay or quit notice – applicable to rent defaults. The notice gives the tenant a specified number of days, usually 3–5 days, to pay the rent or quit the premises (move out).
• Cure or quit notice applicable to default of lease conditions. The notice gives the tenant a specified number of days to comply with lease terms by curing the default or quit the premises (move out).
• Unconditional quit notices – This notice requires the tenant to quit (vacate) the premises immediately without opportunity to cure the lease default.

If the tenant ignores a notice to pay, cure or quit a lease default, the landlord can begin legal action for eviction. If the landlord proves the default, a legal order will be issued to remove tenants from the rental premises.

Breaking the Lease

Early termination of the lease agreement breaks the contract terms and conditions of the lease and could be requested by landlord or tenant as a business or personal necessity.

The lease agreement may contain language that specifically allows the landlord to terminate a lease before the contracted end date. Reasons that a landlord may want to terminate a lease early include:

• Sale of the rental property,
• Landlord intends to move into the rental as his personal residence, or
• Rental unit requires extensive repair or renovations that require the unit to be vacant for an extended period of time.

There could be other circumstances whereby landlord and tenant reach mutual agreement to end the tenancy without further responsibility by either party.

The landlord cannot terminate a tenant’s lease for discriminatory or retaliatory reasons nor lock the tenant out of the rental unit.

State statutes provide protection for tenants who have legitimate reason to request early termination of their lease. In some states landlord-tenant statutes allow a tenant to terminate a tenancy before the end of term without landlord permission for reasons such as:

• Military Duty – A tenant who is a member of the armed forces, or that tenant’s spouse or dependent, who delivers copies of reassignment or deployment orders to the landlord within the required number of days of receipt of orders.
• Domestic Violence – A tenant who is a victim of domestic violence, sexual assault, unlawful harassment, or stalking, and who has a legal protection order or has reported the incident to the authorities.
• Harassment – A landlord or landlord’s agent violates the tenant’s right to privacy and quiet enjoyment of the property by stalking, sexual assault or unlawful harassment of the tenant.
• Habitability Issues – As a remedy to the landlord’s failure to maintain fit and habitable housing resulting in constructive eviction of the tenant.
• Withholding of essential services to the tenant excluding or  limiting access to rental premises
• Property Damage – The rental property is significantly damaged or destroyed by natural disaster or other reasons beyond the tenant’s control.
• Violation of Privacy Rights to Quiet Enjoyment of the Premises – Intrusiveness of the landlord that violates tenant privacy, such as landlord entry to unit without tenant notification.

In a few states landlord-tenant statutes allow for early termination of tenancy for reasons such as tenant health problems, or tenant need to move to assisted living facilities.

The death of a tenant during an active lease requires due diligence by the landlord to determine how state statutes address the issue. Lease termination may be allowed at a certain period of time after the landlord has been notified of the tenant’s death. In some states the death of a tenant does not  automatically terminate the tenant’s lease agreement unless the landlord’s lease agreement specifically contains language to the contrary. The tenant’s lease agreement remains active to the lease expiration date. What happens to a lease agreement following the tenant’s death depends on whether the tenant was in a month-to-month rental agreement or a fixed term lease agreement. A landlord will need to review applicable state laws and terms of the lease agreement to determine how to proceed.

There might be other reasons that a tenant could have cause to break his lease such as  the rental unit did not meet required building codes, licensing requirements, or compliance with federal and state regulations regarding environmental issues, such as lead-based paint regulations. Not as likely, a lease could be terminated because the lease was made void and unenforceable because the lease agreement contained illegal clauses that require the tenant to:

• waive landlord liability for landlord negligence,
• accept an as-is clause for habitability,
• accept responsibility for repairs to the property,
• waive their right to privacy and quiet enjoyment, or
• waive their right to take legal action against the landlord.

However, the most common tenant reasons for requesting early termination of the lease are personal matters such job transfer/relocation, job loss, divorce, serious illness, buying a home, moving in with a family member, partner/roommate, other life events or changes in in lifestyle. In most states these reasons are not considered legitimate reasons for early termination of a lease. The landlord’s lease agreement may contain clauses that address the issue of early termination by the tenant and options that could be pursued for release from the lease contract.

The process of tenant screening is a series of steps taken in accordance with regulatory requirements and business practices to qualify applicants for tenant selection.

The selection of a new tenant is considered the most important business decision a landlord will make for his property operations. Therefore, developing the process of compliant screening policies and practices that support business necessity is a core management function.

There are discrete steps in a tenant screening process, that, while could be conducted as an individual screening in specific situations, if used collectively, complete the process to protect the business investment and the rental community. Conducting tenant screening as a standardized process helps to place priority and focus on those qualifications that contribute to a quality tenant. The purpose of a standardized practice is to qualify applicants in a non-discriminatory manner in the same proscribed manner removing potential subjectivity and bias from the process.

A compliant tenant screening process that protects business interests requires much detail in order to screen for potential risk for issues that may arise during a landlord-tenant relationship.

Rental Criteria

Setting tenant screening criteria customized for business protections requires time and effort to research business requirements, legal compliances, and market conditions. As business circumstances, legislative actions, and rental markets change, so should tenant screening criteria. A landlord must keep legally compliant and stay relevant to local markets in order to protect his business interests.

In creating tenant screening criteria, many landlords take into consideration the commonly accepted definition of a quality tenant as the tenant who (1) pays full and timely rent; (2) complies with lease terms and conditions; and (3) maintains the rental unit to good condition.

Based on these criteria a landlord would require an applicant to furnish proof of identity and consent to tenant screenings for a credit report, background check, public records search and verifications of current employment, income, rental housing history, and landlord references.

Fair Housing

The federal Fair Housing Act prohibits discrimination based on protected classes of race, color, national origin, religion, sex, disability, and familial status in the sale or rental of a dwelling and in other housing-related transactions. Fair housing laws of states, cities, and counties may provide more stringent protections against housing discrimination than does the federal Fair Housing Act.

Other Regulatory Requirements

Tenant screening is subject to numerous federal, state, and municipal laws. Due diligence is required to ensure compliance with the current regulations, prohibitions, and restrictions that are applicable to the location of the rental property.

Rental Listing

The rental listing helps to create interest in the vacancy by highlighting property features and amenities in the listing. Providing essential property information for property address, asking rents, qualifying criteria, and lease terms allows prospects to assess their interest in the property and to pre-qualify themselves to these disclosures.

Those prospects reaching out to the landlord for more information provide equal opportunity for the landlord to preliminarily qualify prospects to rental standards.

Showing the Unit

Most prospective renters will want to physically tour the available unit or at least take a virtual tour of the unit. Having quality photos of the property, its amenities, and unit features on the landlord’s website, an open house, or a private showing are other options for the prospect to see the unit and further qualify himself to interest and application.

Application

A rental application is the most efficient means to collect preliminary information about a prospective tenant to begin the process of qualification to rental standards.

Information requested on the application form should be relevant to business necessity. With permissible purpose and under legal compliances, a landlord can request any information that would objectively point to qualification requirements such as the applicant’s ability to pay timely rent and comply with lease terms and conditions.

An application requests personal information about the applicant, such as legal name, current and previous addresses, contact information, Social Security number and state driver’s license information. Other information that may be requested includes other occupants’ information, rental history over the past 3-5 years with landlord references and contact information; employment information; proof of income; and other financial information.

FCRA Compliances

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.

Applicant Interviews

As the landlord conducts a review of application information, he may need to ask the applicant for additional information or to clarify information supplied on his application form.

Identity Verification

Verification of the applicant’s identity should be done during the initial contact with a prospective renter. Proof of identity can be verified with various types of identity documents.

Employment and Income Verifications

A landlord screens an applicant to determine if the potential tenant would be able to meet a tenant’s required rent obligations. Accordingly, one of the first tenant screenings to conduct is verification of the applicant’s employment and income. Note that source of income is a protected class by some state, city, or county statute/ordinance. A landlord cannot reject a rental applicant on the basis of the applicant’s source of income as long as the income is from a lawful source. In many of these states and localities, source of income protection includes rental assistance through participation in the Section 8 Housing Choice Voucher program.

References

Most experienced landlords recommend asking the applicant to provide rental history for the past three years. Usually that timeframe will provide one or two prior landlord references in addition to the most recent landlord reference.

A landlord may request the applicant to furnish personal references. This may be helpful in screening a first-time renter who has not yet established rental history.

Screenings

Consumer Credit Report

A credit report provides the landlord with an applicant’s credit history as reported to a credit reporting bureau as of a certain date. The credit history shows the applicant’s credit usage and credit management. By analyzing the data, the landlord evaluates whether the applicant could be a potential financial risk if selected as a tenant.

Background Checks

Landlords must comply with federal, state, and local laws that regulate or prohibit the use of criminal history background for tenant screenings. A landlord’s blanket policy that excludes any person who has been convicted of any offense is discriminatory and violates provisions of the Fair Housing Act. A landlord will need to conduct his own research to determine applicable compliances for the jurisdiction governing his rental property.

Public Records Search

Public records search for an applicant’s bankruptcy, liens, judgments, and eviction records may be conducted to determine potential financial risk to the landlord’s business.

Notification of Decisioning

It is the landlord’s business decision based upon assessment of risk and the analysis of the applicant’s qualifications to accept or reject an applicant. Qualified applicants can be advanced to an offer of tenancy. Applicants that do not qualify to standards should be notified in a timely manner that their application has been declined.

Adverse Action Notice

An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. It includes a landlord’s denial of a rental application as well as an action by the landlord that imposes a burden on the applicant that is not required of all tenants, such as requiring a co-signer or a larger security deposit.

When a landlord takes an adverse action that is based solely or in part on information contained in a consumer report, the Fair Credit Reporting Act requires the landlord to give the applicant a notice of that fact orally, in writing, or electronically. The adverse action notice is required even if the information in the consumer report was not the primary reason for the decision. Even if the information in the report played only a small part in the overall decision, the applicant or tenant must be notified.

Additional Information

Security deposit restrictions by statutes and ordinances regulate the landlord’s policy and practice for the maximum amount of security deposit that can be collected, the time period for deposit accounting and return of available deposit funds, security deposit accounting disclosure requirements, and mandates for deposit installment plans.

Recent legislative changes in many jurisdictions requiring lower deposit amounts and utilization of installment payments for security deposits have been implemented as means to address housing affordability. With higher rents and, accordingly, higher rent-based security deposits, renters may struggle to afford the move-in expenses of screening and application fees, first month rent, last month rent, and security deposit. A large dollar amount due at lease signing can reduce the size of the applicant pool and potentially extend vacancy down-time. With changing regulatory requirements and market conditions, a landlord will need to consider many factors in setting his rental policies for rents and deposits.

There is movement by some jurisdictions to require security deposit alternatives and security deposit replacement options to expand choices for renters to manage their financial obligations for security deposits. A landlord will need to conduct due diligence to determine the applicable legal compliances for security deposit options for the location of his rental property to ensure understanding of those requirements. Due diligence is also required to research deposit models to make an informed business decision on the best deposit alternative/replacement option for the landlord’s property operations. A landlord should have good knowledge of the particulars of his selected deposit option in order to educate the renter on how the option works and what the renter can expect if choosing that option.

Renters Choice legislation

In 2020 Cincinnati was the first city to require landlords to accept alternatives to a traditional security deposit. Cincinnati’s Renters’ Choice law applies to all landlords with 25 units or more and offers three security deposit options:

• an insurance premium, in which the tenant pays a small monthly, nonrefundable fee instead of an upfront deposit;
• an installment plan to spread the deposit equally over six months (or more if the landlord and tenant agree); or
• a reduced security deposit, paid upfront, of no more than one-half the monthly rent.

Columbus has passed a Renter’s Choice ordinance that if a security deposit is required, prior to entering a rental agreement, a tenant required to pay a security deposit, shall either pay the required security deposit in full or select and subsequently fulfill one of the following rental security deposit payment alternatives:

• payment of the security deposit over a series of no fewer than 3 monthly installment payments, which installments shall be due on the same day as the monthly rent payment and which may be paid together with the monthly rent payment in a single transaction,
• payment of the security deposit over a series of no fewer than 6 monthly installment payments, which installments shall be due on the same day as the monthly rent payment and which may be paid together with the monthly rent payment in a single transaction.

The ordinance does not apply to any landlord with fewer than 5 rental units.

The city of Atlanta passed a renters choice ordinance whereby renters can request rental security insurance or monthly installment payments for their security deposit obligations .The ordinance applies to landlords with more than 10 rental units who require a security deposit that is more than 60% of the monthly rent amount. The ordinance allows renters the choice of paying their security deposit in three monthly installments or through third-party rental security insurance. Renters still have the option to pay the traditional cash security deposit collected at lease signing.

State legislation examples

The Texas Property Code allows landlords to give their tenants the option to pay a monthly fee with their rent instead of paying a security deposit. Under this law, the landlord can choose to purchase insurance to protect the rental with the monthly fee. If the landlord chooses to do so, the fee cannot be “more than the reasonable cost of obtaining and administering the insurance” purchased under this law. If the landlord files a claim under the insurance purchased with this fee, they cannot make the tenant pay them for the same damages.

In the state of Washington, upon written request from a tenant a landlord must generally permit the tenant to pay any deposits, nonrefundable fees, and last month’s rent in installments. In all cases where premises are rented for a specified time that is three months or longer, the tenant may elect to pay in three consecutive and equal monthly installments, beginning at the inception of the tenancy.

Other states that have passed legislation addressing security deposit alternatives and deposit replacements include Delaware, Florida, and Nevada. Other states have pledged support or have proposed legislation for options to traditional security deposits.

Deposit Alternatives

Alternatives to traditional cash security deposits may include deposit options such as surety bonds, deposit installment programs, guarantor programs, and billing authorization services.

Surety Bonds

The surety bond model of deposit alternatives may be the most familiar product to landlords. While specifics of surety bond programs may vary among a number of service providers, in general a surety bond program is a contractual agreement between three parties, the landlord, the renter, and the surety bond provider. The renter purchases a bond equal in the amount to the security deposit required by the landlord. The bond is held by the provider in the event that a landlord needs to make a claim against the renter for a lease default. The renter pays a non-refundable premium, typically a small monthly fee, or a one-time premium that is usually a small percentage of the total insured amount as specified by the landlord. The premium is in addition to the stated monthly rent. The premium is the renter’s promise to comply with lease terms and conditions; i.e., to pay full rent and not damage the rental property. Coverage provided by the bond is the same as would be covered by the cash deposit, e.g., property damage, lost rent, but not normal wear and tear.

The provider holds the bond that guarantees coverage of the landlord’s risk up to the value of the bond. The renter is able to move in without a large cash outlay, yet the landlord can still protect his business interest. If the landlord suffers a loss and files a claim, the provider uses the bond to cover and pay out the claim directly to the landlord. The provider will then seek repayment from the renter. Rather than the landlord deducting charges for tenant-caused repairs from a deposit already paid, the renter gets a bill directly from the carrier.

Security Deposit Replacement

A security deposit replacement option is lease insurance which gives the renter a deposit-free move-in. The renter avoids the expense of a security deposit payment at move-in and pays a small monthly deposit waiver fee in addition to his monthly rent. The property manager insures his property against rent loss and damage, generally at a higher coverage amount, while reducing administrative costs of traditional deposit collection and handling. Depending upon the service provider, lease insurance may be an option only offered at this time to large rental communities. Due diligence will be needed to research providers, program details, and service areas.

Security deposits are required by a landlord to protect his business from property damage and lost rents The model or methodology used to protect the business is dependent on business necessity and legal compliances.

While security deposit options legislation is being considered, pending, or has been recently enacted in some rental markets, it should be noted that security deposit option services offering alternatives for traditional deposit collection are not new to the rental market. Independent landlords with small to mid-size properties have for some years voluntarily contracted with deposit services providers to offer such options to their renters.

Tenant screening is a housing provider’s best practice for risk reduction of financial loss caused by tenant default. Failure to adequately screen applicants creates potential liabilities for the housing provider’s business. With the complexities in today’s rental housing regulations and requirements, avoiding unnecessary business risk is a prudent, business necessity.

As discussed in many articles, managing investment property carries risks. Appropriate measures must be taken in business operations in order to reduce exposure to known business risks. Non-payment of rent, nuisance, disturbances, property damage, and direct threats to the safety and welfare of others are examples of high-risk tenant behaviors that have a negative impact on business. Tenant screening is the most important tool for risk assessment of an applicant before he becomes a high-risk tenant.

The tenant screening process provides a consistent, verifiable means to collect relevant information about an applicant to make an informed tenant selection decision A formalized process legally compliant and developed to good business standards helps the housing provider comply with fair housing equal opportunity for all prospective renters to qualify to tenant selection standards. By evaluating the same decisioning factors, such as consumer credit reports, and background checks, required of every applicant, the housing provider establishes a universal screening process that prevents potential bias among applicants. Having a standardized application process and screening policy and practice helps to ensure a non-discriminatory tenant selection decision.

Housing providers depend upon a stable, timely income stream to cover operating expenses and a return on their investment. Without adequate screening for an applicant’s financial ability to pay stated rents, the housing provider may be harmed by his own inability to meet his financial obligations. It could be particularly harmful for the independent housing provider who self-manages his properties and must depend upon a regular, full cash flow to continue operations. Appropriate screenings for the applicant to determine the applicant’s financial ability and his payment history of financial obligations provide a means to evaluate financial risk of the applicant to the rental business. Gaining an understanding of the applicant’s financial situation at the time of application may allow the provider to project future ability of the applicant to meet his obligations during tenancy.

Installing a qualified tenant can help reduce tenant turnover. Tenant turnover is expensive, time consuming, and resource intensive as it recreates the process of screening and selection. There is no reason to let a qualified, known tenant depart in order to chance a new unknown tenant to fill the vacancy.

Why should housing providers conduct tenant screenings? Housing providers have a legal duty of care to take reasonable measures necessary to protect the safety and security of their tenants and their property from unacceptable levels of risk.The housing provider’s duty of care to protect tenants from foreseeable harm extends to protect tenants from third party criminal acts and, correspondingly, to protect the neighborhood from criminal acts of his tenants.

There is good reason to conduct relevant screenings to determine the risk as presented by the applicant for consideration of tenancy. Tenant screenings can help identify risky behaviors of applicants such as illegal activities, threats or nuisance acts toward other tenants or neighbors or property damage during previous tenancies. A housing provider can be held responsible for negligence if his screening practices are inadequate and fail to detect a threat to others.

The tenant screening process is a matter of establishing a level of trust between housing provider and potential tenant through a process of verification and confirmation of relevant facts. By conducting tenant screenings, a housing provider verifies the truthfulness and completeness of applicant supplied information. To the best ability, the housing provider seeks assurance that the potential tenant could be counted on to become a responsible and compliant tenant who will not pose a known danger to other tenants, neighbors, or cause destruction of property.

The tenant screening process is composed of various verifications and consumer reports that identify, confirm, and report information relevant to qualifying the applicant to the housing provider’s rental criteria. Information collected from the application form, applicant interviews, housing provider’s verifications, and consumer reports obtained with permissible purpose and with authorization by the applicant are collectively evaluated and analyzed to give a financial overview and background check of an applicant.

Generally, a housing provider’s tenant screening process includes identity verification, verification of employment and income, a consumer credit report, a background check, a review of the applicant’s rental history, and a public records search. The housing provider will need to research applicable regulations and requirements for the jurisdiction of the rental property to determine permissible screenings by state statutes and municipal ordinances.

• Identity verification – An important first screening is to conduct identity verification of the applicant to protect the housing provider against harm from tenant identity theft and fraudulent acts in renting.
• Verification of employment and income – While source of income is a protected class in many localities, the applicant’s ability to meet rent and other living costs must be verified through appropriate documentation of income such as earnings statements. A housing provider must research applicable statutes and ordinances for the jurisdiction of his rental property to determine the requirements for income qualification. There could be low barrier screening requirements in place that must be followed. As an example, a traditional qualification criterion has been verification of monthly income that is three times the monthly rent. In some jurisdictions, the housing provider may be restricted to a qualification standard that is less than three times the monthly rent.
• Background check. By requesting a tenant background screening for criminal history, the housing provider is protecting himself, his business, his tenants, and neighbors from harm from known risks of criminal acts. The provider must be familiar with jurisdictional requirements for individualized assessment of an applicant’s criminal history. The criteria for use of criminal history in making housing decisions must be developed with respect to what crimes pose a risk, why such crimes pose a risk, and what constitutes a reasonable time period when the applicant no longer poses an unacceptable risk. As required, an individualized assessment may be conducted to provide an opportunity for the applicant to submit supplemental evidence to explain, justify or negate the relevance of potentially negative information. Some of the factors that could be considered in the individualized assessment process include:
  • the nature and severity of the criminal offense
  • how recently the offense occurred
  • the nature of the sentence
  • the number of criminal convictions
  • the length of time passed since the most recent conviction
  • the age of the individual at the time the criminal offense occurred
  • the evidence of rehabilitation
  • the individual’s rental history before and after the criminal conviction
• Review and analyze previous rental history. A housing provider can conduct an interview with the applicant’s previous housing provider to determine whether the applicant kept lease terms and conditions, paid rent timely, and took good care of the rental unit.
• Public records search. A tenant screening of public records may disclose records of bankruptcy, liens, judgments, or evictions of the applicant of which some could be a concern for qualifying the applicant. A provider should have policy that addresses how such issues as disclosed will be handled.
• Review credit history. A housing provider should conduct a review of the applicant’s credit history, including total debt obligations, payment history, missed and late payments, and accounts in collection. The applicant’s ability to meet debt obligations is a decisioning factor in offering tenancy. A housing provider wants to be sure that the applicant has the ability and demonstrates the willingness to pay a rent obligation.

The housing provider should be alert to issues that could indicate a potential problem. These red flag issues should be discussed with the applicant and appropriate measures taken as required for investigation and resolution.

While a well-developed tenant screening process, compliant to legal requirements, can take some time to conduct, there should be no doubt about the effectiveness of the process. To aid in the efficiency of the process, a housing provider should employ relevant technologies specific to his business operation to help streamline and simplify his screening practices. Having a formal screening policy and practices supported by the appropriate technologies will make screening operations more productive at lesser cost.

Cutting costs by cutting corners is a liability for the provider. Installing a tenant without the appropriate screenings and qualification to standards is risky business. Once installed, a tenant has legal rights that cannot be violated. A housing provider must follow legal requirements for notice and remedy for a tenant who has defaulted on his lease. The provider must use the court system to initiate legal proceeding to evict the tenant and re-gain possession of the rental unit. Legal costs and time spent on just this one tenant alone can be quite costly to business operations. Once the legal process has been completed, the housing provider must spend more money and time to prepare the unit for a new tenant. The rental process will start all over again with requisite costs of time, money, and resources.

Tenant screening done right, gives the housing provider confidence in a tenant selection decision. Quality tenants in a quality landlord-tenant relationship can readily turn into quality renewal tenants, providing cost savings by avoiding tenant turnover.