Archive for the ‘Uncategorized’ Category

When the Tenant’s Security Deposit Isn’t Enough

August, 2019

What are the landlord’s options if the tenant’s security deposit is insufficient to cover costs of property repairs due to tenant damage, cleaning the rental unit, and tenant unpaid rent?

The purpose of a security deposit is to provide the landlord with funds owed by the tenant if the tenant fails to pay rent as agreed, keep the rental unit in clean and sanitary condition, or causes property damage beyond ordinary wear and tear.

State statutes regarding security deposit vary significantly among states. Many states address issues of security deposit limits, deadlines for itemization and return of security deposits, and disclosure requirements as required by statute for a separate holding account including interest rate and interest payment. A landlord is legally accountable to the tenant for use of the security deposit funds.

Once the landlord and tenant have conducted the move-out inspection, the landlord must prepare a written security deposit statement of accounting, itemization, and explanation of deductions from the security deposit. A landlord cannot charge the tenant for damage that was evident at tenant move-in, replacing an item when a repair would be sufficient, or cleaning when the tenant paid a non-refundable cleaning fee. If repairs or cleaning cannot be performed within the time required by statute to return the security deposit, a reasonable estimate of costs can be made. When work is performed, the receipts must be for an amount at least as much as the amount deducted.

A reasonable approach for the dollar amount charged as damages is to determine whether the tenant has shortened the useful life of an item that will wear out. If the tenant has damaged or shortened the item’s useful life, the landlord may charge the tenant for the prorated cost of the item based upon cost of the item, the expected useful life, and replacement cost.

If the tenant has satisfactorily performed to his lease terms and conditions, the landlord must return the full amount of the deposit to the departing tenant. When the landlord determines that deductions from the deposit are required for cleaning to return the rental unit to good condition, or required to repair tenant damage to the unit, the security deposit statement will itemize those deductions, showing the amount and description of each type of deduction. In the letter accompanying the accounting statement, the landlord should provide the former tenant with details on the total amount the landlord owes the tenant or the total amount the tenant owes the landlord. The landlord will remit the amount due the tenant with the accounting letter or the landlord’s letter will request the tenant to immediately remit the balance due to the landlord.

The tenant may respond to the accounting statement by challenging the deductions from his security deposit. Many of the disagreements between a landlord and tenant stem from the handling and accounting of the security deposit. If a tenant strongly believes the landlord’s deductions were in error or unreasonable, a tenant may choose to take legal action against the landlord. The landlord’s best course of action when a tenant disagrees with the deposit accounting may be to reach an acceptable compromise with the former tenant regarding the deductions and the balance due. As a practical matter a compromise may be the better business decision depending upon the amount and time that would be required to defend against the matter in court and evidence regarding which party is right. If the landlord and tenant cannot reach a satisfactory agreement between them, they could consider using a mediation service. If the landlord and tenant settle a security deposit dispute through a compromise on the tenant’s claim for return of the security deposit, the landlord should document in writing that the agreed upon sum of XXX is the tenant’s acknowledgment of full satisfaction of the tenant’s claim.

If the tenant does not respond to the landlord’s request for payment, or refuses to pay the amount due, the landlord may take legal action to collect the money owed him. The question that the landlord must ask himself: “Is the amount due the landlord an amount worth the landlord’s time, effort, and expense to pursue collection?”

Before rushing to file suit in court, a landlord should write a formal demand letter to the former tenant requesting payment of the past due balance. A copy of the security deposit statement and a copy of the statement’s cover letter that was provided to the tenant at move out should be enclosed with the demand letter. The demand letter should state the facts clearly, set a deadline for payment, and advise that a lawsuit will be filed in small claims court if an understanding and resolution cannot be accomplished by the deadline. In some states the landlord’s written demand letter for payment is a requirement by statute before a landlord can file in small claims court.

The maximum small claims court limit varies significantly among states. A landlord should confirm the applicable state’s jurisdictional amount before deciding to file to be sure the claim will not exceed the court’s limit. It may be a better business decision to adjust the amount of the claim to scale it down to fit the court limit.

The landlord’s decision to sue may be dependent upon whether the landlord has a strong case, knows how to locate the former tenant for required service, and the landlord’s chances of collecting a judgment if the landlord wins.

Most landlords will have a strong case against a former tenant who now owes money for repairs, cleaning, and rent. Experienced landlords know to keep detailed records on the costs of cleaning and repairs, including all receipts for materials, labor, and services performed by third party contractors or service companies. If the landlord or his employees perform any of the required work to return the unit to good condition, the same type of detailed record keeping applies to in-house cleaning, maintenance and repair work. Documentation in the tenant’s file and available for use in proving the landlord’s case could be photos or videos of the condition of  the rental unit at tenant move in and move out,  a copy of the tenant signed move in and move out inspection checklist, maintenance and repair logs for the rental unit, detailed work logs of cleaning and repair performed by the landlord or his employees including itemization of number of hours and reasonable labor costs associated with the cleaning and repairs, written statements of the condition of the unit by third party vendors contracted for cleaning and repairs, or witnesses to the physical condition of the unit at move in and move out who can testify to the need for cleaning and repair.

If legal action is taken by the landlord in a timely manner, the landlord may have a forwarding address for the former tenant, has knowledge of the former’s tenant work address, or may use the tenant’s contact information to obtain an address that could be used for court service of legal papers.

A somewhat more difficult decision for the landlord is the timing of a lawsuit. If the tenant left owing months of past due rent, the former tenant may have financial difficulties that now make him insolvent, bankrupt, or otherwise judgment proof. Being awarded a money judgment does the landlord no good if the judgment cannot be collected. However in most states a money judgment is good for ten years, with possible extensions thereafter, and the former tenant’s financial situation could change for the better, allowing the landlord a good chance to collect his money. Often the debtor will be motivated to pay the judgment, including the interest allowed by statute, in order to obtain a loan from a bank.

A landlord should research applicable law to determine the statutory timeframe for filing suit on a landlord-tenant related issue in small claims court. The landlord may need to postpone filing in small claims court until a future date because the tenant cannot be located once he has vacated the rental unit. It may require some investigative work to discover a new home or work address for the former tenant in order to comply with notification and court service of legal papers to the former tenant.

Employment History Verification

August, 2019

Verifying past employment of a job candidate is an important step in the hiring process. The employer must determine as well as possible or practical that the candidate has presented factual and true information on his resume and application regarding employment history. The purpose of the verification is to independently confirm the candidate’s employment by the listed companies and the associated job duties and responsibilities at those companies. The hiring employer can cross reference the verified information with information on the resume and the application along with information provided during the applicant interview that could support an informed offer for employment.

If, during the verification process, the information provided by the candidate proves to be false, or misleading, the hiring employer may have good reason to suspect there could be other discrepancies, errors or omissions of information on the candidate‘s resume and application. The employer cannot advance a candidate in the hiring process without due diligence in employment verifications.

An employer should have an established policy and written procedures that govern employment history screening. The policy and procedures standardize the verification process for past employment and work history. With legally compliant best practices, an employer can reduce the likelihood of claims regarding hiring negligence and employment discrimination. To further protect his business interests and consumer privacy rights, it is critical that employers understand the legal obligations and compliances in conducting employment background checks.

The Fair Credit Reporting Act (FCRA) governs how employers obtain and use consumer reports. Consumer reports include background checks for screening employment history. When an employer uses the services of a third party screening provider to obtain a consumer report for employment purposes, both the employer and the reporting agency provider must comply with FCRA requirements. The employer must disclose to the applicant that background reports may be used for employment decisions. Applicant consent and authorization must be obtained before conducting background checks.

In addition, it is important to keep in mind that some states and municipalities may have requirements on the use of background reports in employment screening. The state and local disclosure and authorization requirements may be more restrictive than the federal FCRA requirements. If an employer conducts his own investigations, the FCRA requirements are not applicable. However, the employer must still obtain the applicant’s consent and authorization for background check screenings.

An employer should set an employment verification policy specific in scope and detail as related to his business and industry needs regarding how a verification of employment process will be conducted. The employer can set different screening parameters for employment verifications as appropriate for his industry, specific job positions, or levels of authority but cannot set verification parameters that discriminate on a person-to-person basis.

As examples of verification parameters, an employer’s policy for previous employment screenings could be based on: a specific number of years of employment, such as, all employers within the past 5-7 years regardless of how many companies provided employment; the past 2 or 3 employers regardless of the number of years of employment; or a combination of the number of years of employment and a number of employers within a specified time frame and limited by a number of employers, such as, the last 3 employers within the past 5 years.

An important point in the employer’s verification policy and practices is the application and enforcement of policy standards. An employer must be consistent in conducting employment verifications in the same manner to the same standard with every job candidate to help avoid claims of hiring discrimination.

Standardization of practices and consistency in application, enforcement, and follow-through are keys to compliant practices. Good faith effort must be taken to verify candidate information with former employers. Reasonable, valid effort should be made to follow through with the verification process including contact by telephone, email, fax, or U. S. mail to an authorized record holder to verify employment information. Written documentation should be kept of all steps taken to contact past employers and verify relevant work history. Notes should be made as to date, time, and method of contact; authorized representative name and title and the verification responses. If the requested verification cannot be completed due to the policy guidelines of the past employer or information is unavailable, written documentation to that effect should be made and placed in the candidate’s file.

Verifications of candidate credentials can take time and effort to locate and contact past employers and the authorizing entity within that company. To help facilitate the verification process, a job candidate should be prepared to provide complete work history information including names, addresses, phone numbers, and contact information for his past employers in accordance with requirements set by the hiring employer.

It is not uncommon to discover a company has gone out of business, changed names through mergers, acquisitions, or rebranding of products and services. Staff turnover and company record keeping procedures of past employers may delay a verification process. Records may not be available or accessible in a timely manner. If a past employer is no longer in business, or unable to provide verification, the hiring employer could consider an appropriate substitute proof of employment as required for due diligence. The job candidate may be able to prove past employment with copies of a W-2 statement, payroll stubs, or tax documents supporting dates of employment.

Another point to consider in the verification process is that the contacted past employer may choose not to respond to the verification request. There is no federal law that requires an employer to provide job references or provide verification of employment for former employees. Most employers do provide employment references and verifications in a good faith effort of professional courtesy and disclosure. All information provided by an employer that verifies employment or used as an employment reference must be factual and accurate in order to avoid liability claims and wrongful defamation lawsuits against the employer.

It may be the fear of liability and concern about lawsuits that can cause many employers to limit their verification responses to only confirmation of dates of past employment and job titles. It may also be the stated policy and practice of an employer to disclose only certain limited information about a former employee.

Due diligence of applicable laws provides guidance to the verifying employer and the past employer for legal compliances and protection of consumer rights.

Recent legislation in some states and some municipalities has placed restrictions or prohibitions on the types of information that can be released by an employer regarding a former employee. Most recently some states have restricted employers from sharing salary or wage history.

Restrictions and prohibitions can vary from state to state and localities. In some states employers may be required to obtain written consent from a former employee before releasing verification information. A signed written consent may be required by the employer’s policy on employment verifications. By law in many states, employers who provide information about former employees are immune from liability for release of information or are likely shielded from defamation lawsuits unless an employer knowingly or intentionally discloses information that is false or misleading or that violates employee’s civil rights.

As permitted by state law or local ordinance, an employer may provide information regarding a former employee’s:

  • attendance, attitude, and effort,
  • awards, demotions, and promotions,
  • disciplinary actions,
  • education, training, or experience,
  • eligibility for rehire,
  • job performance,
  • knowledge, qualifications, skills, or abilities based upon credible evidence,
  • length of employment, pay level, and history,
  • performance evaluation or opinion,
  • professional conduct,
  • reasons for termination or separation,
  • violations of law, and
  • work-related characteristics.

The information shown above has been compiled from various state laws for references and statements by former employers. Hiring employers may ask a variety of questions relevant to employment history and work experience to aid in making informed hiring decisions.

Employers will need to research applicable state and local laws to be sure their employment verification policy and practices are compliant. For permissible purposes of employment verifications and references, employers must provide a “truthful statement of any facts.”

Our lease contains a standard clause that gives the landlord the right to enter the rental unit for permissible purposes according to our state law. We provide maintenance services to our tenants including routine inspection of the HVAC system and replacement of filters. We have followed state law and our standard practices in the notice requirements to one of our tenants requesting entry for HVAC maintenance services. The tenant is refusing our request for entry. Can a tenant refuse to allow a landlord to enter the rental unit?

August, 2019

The implied warranty of habitability requires a landlord to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease. The tenant’s covenant of quiet enjoyment ensures the tenant that during his tenancy, his use and enjoyment of the dwelling unit will not be disturbed by others including the landlord. For compliance with habitability responsibilities, a landlord can request access to the rental unit as needed for inspections and repairs in order to make sure the property is safe and well maintained.

While ownership of the property and possession of the property are separate matters, at times such matters can create landlord-tenant tension when the landlord requires access to the rental unit and the tenant views the landlord’s entry as a violation of privacy. The landlord can remind the tenant that the lease agreement sets forth the landlord’s legal right to enter the premises for permissible purposes during reasonable hours. Furthermore the issue should always be adequately covered in the lease agreement and discussed during the tenant orientation meeting. Generally with open communication and discussion with the tenant regarding the business necessity for entry, the landlord is granted access to a tenant-occupied property. The tenant should be reassured that the landlord, or the landlord’s agent, will remain in the tenant’s rental unit only for the amount of time required to complete the inspection and maintenance work. If the tenant wishes to be present during the entry time or be represented by a representative, a landlord should try to accommodate the tenant.

Certainly it can depend upon the circumstances of the landlord request and the nature of the tenant’s refusal, but in general the landlord has the legal right to peacefully enter the rental premises to conduct his business during reasonable hours. If agreement is reached regarding entry to the premises, it may be good practice to have a witness accompany the landlord or the landlord’s agent to observe the work being done and to counter any claims by the tenant of unlawful conduct by the landlord or his agent.

Statutes of some states may allow the tenant to refuse a written request for entry, but could require the tenant to prove justification for his decision. If the tenant repeatedly refuses landlord access to the rental unit, the tenant could be held in breach of his lease for failing to cooperate, thus providing a cause of action for the landlord to proceed with an eviction lawsuit.

Should I requalify a tenant before offering a lease renewal?

August, 2019

To protect your business you may decide that,, even though the tenant originally qualified, you need to evaluate the tenant’s potential future financial risk. A tenant who qualified under your rental standards a year ago may have had a change in circumstances that may not meet your current qualification criteria. Be sure you understand current applicable laws regarding the use of consumer reports by landlords for tenant screenings before conducting any screening for qualification. Current and pending legislation at the state and local level may regulate or prohibit the use of consumer reports for tenant screenings.

However, many landlords considering a lease renewal for a good tenant will usually review the tenant’s file, look to the tenant’s rent payment history and how the tenant has conducted himself during the lease term as the primary factors for a renewal offer.  If the tenant has fulfilled his lease obligations, i.e. taken good care of the property, does not cause disturbances, followed rental rules, etc., most landlords would prefer to retain a good tenant rather than incur the often significant costs associated with tenant turnover.

The decision for lease renewal is the landlord’s decision. If you have concerns about the tenant’s future ability to meet lease terms and conditions, you would obviously allow the tenancy to end at the lease expiration date. Alternatively, you could renew the lease on a month-to-month basis.

When you and your tenant agree on renewal lease terms and conditions, you should have the tenant update his personal information such as current phone numbers, email addresses, emergency contact information, and current employer for your records.

I received a complaint about one of my tenants having a loud party late into the night. I talked with the tenant and I thought he understood that noise and disturbances to his neighbors was in violation of the lease terms and conditions. Now I have a new complaint against him about noise. What should I do next?

August, 2019

You will need to take documented, formal enforcement of your lease terms and conditions.  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.

While a tenant whose previous behaviors have never been a problem may be responsive to an oral request by the landlord to remedy the situation, the tenant must understand and acknowledge that the request is a warning, not just a conversation. Now with a second complaint, your tenant must not have understood you actually gave him an oral warning that his conduct was in violation of the lease during your talk. You should formalize your oral warning with a written warning letter to the tenant regarding his violations.

Utilizing a written warning for every such problem, even if the first, may be a better business practice for notifying a tenant of a lease violation. The  written warning letter to the tenant should provide relevant specifics of the problem behavior, including date and time; the required corrective action by the tenant to remedy the problem; citation of the specific lease term or condition that has been violated; and the consequences if the tenant fails to take corrective action for compliance.

A warning letter can be effective in some problem situations but keep in mind that a warning letter is an informal writing and does not qualify as a formal termination notice. Tenants who choose to ignore a warning letter or refuse to comply with lease terms and conditions will need to be served with a formal notice for termination of tenancy.

Formal notice to terminate a tenancy can be served with a Notice to Cure or Quit. A Notice to Cure or Quit demands that the tenant comply with one or more terms of the lease agreement (Cure) and, if the tenant does not comply, to end his occupancy (Quit). Notices to Cure or Quit are typically given after a violation of a term or condition of the lease agreement, such as nuisance, waste or illegal use.

You should always document in writing the details of any relevant landlord tenant discussion regarding a lease violation and corrective action taken by landlord and tenant. Copies of writings and Warnings and Notices served on the tenant should be kept in the tenant’s file.

When a Natural Disaster Causes Rental Property Damage

August, 2019

Difficult to predict in timing, severity, and duration, a natural disaster can cause major damage to, even destruction of a landlord’s real property. The damage and destruction to a property can cause business interruption to and even failure of the business. A landlord should be prepared with contingency plans to address a natural disaster situation including: tenant evacuations, tenant relocations, property safety and security measures, habitability issues, lease termination, eviction, surrender and abandonment issues, insurance claims, and repair, restoration and rebuilding plans.

The following information may be of benefit to a landlord in developing a contingency plan to address events during and after a natural disaster.

Most states have adopted the Uniform Landlord Tenant Act (URLTA) in whole or in part as the basis for their landlord-tenant statutes. URLTA provisions address various rental terms and conditions, and policies and procedures including casualty damage to a dwelling unit. As noted in the URLTA, “If the dwelling unit or premises are damaged or destroyed by fire or casualty to an extent that enjoyment of the dwelling unit is substantially impaired, the tenant may (1) immediately vacate the premises and notify the landlord in writing within [XX] days thereafter of his intention to terminate the rental agreement, in which case the rental agreement terminates as of the date of vacating; or  (2) if continued occupancy is lawful, vacate any part of the dwelling unit rendered unusable by the fire or casualty, in which case the tenant’s liability for rent is reduced in proportion to the diminution in the fair rental value of the dwelling unit.”

Some states’ landlord-tenant statutes may be silent on the obligations and duties of landlord and tenant following a natural disaster. If so, a landlord can include language in his lease agreement to add detail and clarity to his rental policies and practices related to what happens in the event that a natural disaster destroys or otherwise damages a rental unit.

Lease Agreement

The lease agreement is the governing document in the landlord-tenant relationship. In the aftermath of storm, flood, or other weather-related damage to a rental unit, a strong lease agreement is important in helping to protect the rental property, secure tenant safety, and ensure business continuity. Advance preparation and planning are key elements to quickly address and resolve issues during the return to business. Of concern to both landlord and tenant is what needs to be done when (1) when a rental unit has been destroyed and is not habitable, and (2) a rental unit has been damaged but is habitable.

Implied Warranty of Habitability

The implied warranty of habitability is a legal doctrine in most states that requires landlords to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease.

A lease agreement is a legal contract between landlord and tenant that does not end even if the rental premises is destroyed by a natural disaster. If the rental unit is deemed uninhabitable, the landlord must take steps to formally, legally terminate the lease agreement and release the tenant from his contract obligations.

If the rental unit is damaged but considered still habitable, the lease agreement is still in effect, binding landlord and tenant to original lease terms and conditions.

Habitability issues raise concerns with tenants regarding where they are going to live, when repairs will be done, and, for most tenants, what is their rent responsibility. Landlord communication with tenants is important to keep tenants informed and working together with the landlord to continue the tenancy or move forward to lease termination.

Rent

The lease agreement should cover all rent obligations of the tenant during his tenancy. The landlord’s obligation to provide habitable housing is tied to the tenant’s obligation to pay rent as agreed during the lease terms. If the rental unit is not habitable, a landlord cannot collect rent per the lease terms. Until the lease agreement expires at end of contract term, or is legally terminated, the tenant is responsible for rent. When the lease agreement has been legally terminated and the tenant has surrendered the rental premises, the tenant’s obligation for rent is ended.

Rent Abatement

A lease agreement may include a clause that in the event the rental property is damaged, a landlord agrees to reduce the tenant’s rent proportional to the amount of damage incurred, or if the rental property is destroyed, to suspend rent until the rental property returned to habitable condition or is rebuilt.

Rent Withholding

A tenant may withhold rent in an attempt to force the landlord to comply with landlord obligations to keep and maintain a habitable rental unit. In the case of a natural disaster, damage may be beyond the landlord’s control. Rent withholding serves no purpose in a casualty event. In some states rent withholding is prohibited by statute for such an event.

Security Deposit

The issue of the tenant’s security deposit must be addressed in the lease agreement regarding what happens in the event of lease termination due to habitability issues. A tenant cannot be held responsible for damages caused by a natural disaster. A landlord can recover funds from a tenant’s security deposit if the tenant has defaulted on his obligation to pay rent and owes past due rents. If the rental unit has been destroyed, a proration of the security deposit as of the date of the casualty should be made and the prorated amount refunded to the tenant. If the rental unit is damaged but still habitable, the security deposit can in some cases be retained by the landlord.

Lease Clauses

The following sample lease clauses addressing property damage or destruction, and as allowed by statute, may be of help to provide clarity for casualty issues. Landlords may want to consider incorporating such language in their lease agreements.

  • Landlord’s responsibility to repair or replace damaged rental property is determined by the terms of the lease or as required by law.
  • Landlord is not liable for damage to or loss of Tenant’s personal property caused by a natural disaster. Landlord does not provide insurance coverage for loss or damage to Tenant’s property. It is Tenant’s responsibility to timely acquire insurance as required by the lease or as Tenant desires to cover loss or damage to his personal property or personal injury.
  • The occurrence of any natural disaster does not relieve Tenant from his obligation to timely pay rent and other owed monies. If evacuation or other storm preparation might prevent Tenant from paying rent on the first of the month, Tenant must make arrangements to pay rent in advance to avoid late payment and associated penalties.
  • Neither Landlord nor Tenant shall be required to perform any covenant or obligation in this Lease, or be liable in damages to the other party, so long as the performance or non-performance of the covenant or obligation is delayed, caused by or prevented by an act of God.
  • No party shall be liable or responsible to the other party, nor be deemed to have defaulted under or breached the agreement, for the delay in performance of this agreement when and to the extent such failure or delay is caused by acts beyond the party’s control (force majeure).

Due to many variables including state landlord-tenant statutes and unique lease agreements for individual properties, it may be advisable for a landlord to consult with an experienced attorney knowledgeable in landlord-tenant matters to ensure understanding and compliance of applicable law.

What’s the biggest complaint in renting to students?

August, 2019

Property damage and noise disturbances are the most frequently cited problems in renting to college students. Damage including excessive wear and tear to the property can result from having multiple occupants in the unit and frequent visitors to the property. Property damage can also occur if tenants ignore maintenance issues which could cause major damage at a later time when finally discovered.

A lease agreement should always include a clause that prohibits tenants and their guests from creating a nuisance by disturbing or interfering with the quiet enjoyment of the rental property by other tenants or nearby residents. If the tenant violates the lease by creating a nuisance with loud or excessive noise, you should take action accordingly to your lease terms and conditions regarding disturbances.

Should I even bother with running a credit report on student renters? Most of them won’t have a credit history.

August, 2019

Your tenant screenings are priority risk management measures for all rental markets and demographic populations. While some student renters may have limited history in credit, employment, or independent housing, standard tenant screenings should always be conducted. No assumptions should be made regarding an applicant’s history or qualifications. Without screenings you cannot make an informed decision for tenancy.

Basic tenant screenings can include identity verification, background check, credit report, rental housing history, references, employment and income verification, and public records search. Make sure that you research applicable fair housing laws, state statutes, and local ordinances to determine what screenings are allowed or may be restricted according to state and local regulations for your property location.

You can reject an applicant who does not meet the qualification standards or alternatively, accept the applicant with conditions. It is common to require a co-signer or guarantor for the student applicant as a condition for tenancy. Usually one parent or both parents sign as financial guarantors for the student during the lease term. While the terms co-signer and guarantor are often used interchangeably, they can be significantly different and must be adequately defined by the lease agreement.

A co-signer is the same as the primary signer, being simply a signer on the lease agreement. Unless otherwise stated in the agreement document, a co-signer can have all the same rights as a tenant who resides in the property. Accordingly, all co-signers for a lease agreement should be served all notices that are served on those signers occupying the property.

A guarantor is someone who assumes certain financial liabilities for a lease, but does not actually sign the lease agreement and, therefore, has no rights to the premises. The guarantor can be made liable for all financial matters including rents and property damages or only for rents. The guarantor agreement can provide for service of notices to the guarantor(s).

Keep in mind that each co-signer or guarantor must be screened and qualified according to your standard tenant screening policies before being accepted as the student’s co-signer or guarantor and an offer of tenancy is made.

If I accept college students as renters, what are some of the risk management practices to help protect my property?

August, 2019

There are some common risk management practices that can help protect your business. You may you need to add or modify rental practices to better support your individual business. Many students are first-time renters and have little to no experience in an independent living arrangement. As the landlord you may need to be more actively involved in daily operations in order to stay on top of things. It’s important to be accessible to your tenants for their questions, maintenance and repair requests, and community living issues.

Communication between you and new tenant is an important part of a good tenancy. Start off by letting your new tenants know the best way to communicate with you – such as a rental portal or directly with you by phone, text, or email – and what policies and practices are in place to handle their questions, concerns, and emergencies. It’s a good idea for you to define for new tenants what constitutes an emergency, what the tenant should do in case of emergency, and what you will do in response to an emergency.

You should not take for granted that a new tenant understands rental living. New renters may have more questions than an experienced renter. You may need patience in the beginning of the tenancy to train the tenant on your rental rules, particularly rent issues, that is when the rent is due, how the rent should be paid, if there is a grace period and/or a late fee if rent is not paid by the due date, and what happens if the tenant defaults on his lease terms.

A landlord-tenant relationship is a business relationship and while you can be friendly with a new tenant, you must be professional in all your dealings and respectful of tenant rights.

You need a strong lease agreement that has clear, well-defined rental terms and conditions. During new tenant orientation the important lease clauses should be reviewed with all occupants and with co-signers or guarantors as applicable. The new tenant(s) should be reminded that the lease agreement is a legal, binding contract that governs landlord and tenant obligations and duties for the stated term of the lease. This is an important reminder to a student tenant that he is obligated for the full payment of rent for the stated lease term and the consequences of a lease default. Lease clauses for joint and several responsibility and prohibition of noise and disturbances should be strongly emphasized. All deposits and fees should be collected in good funds before the rental unit is transferred to the new tenant. Remind the tenant that the security deposit is not rent and cannot be used for the last month’s rent.

A move-in inspection of the rental unit is strongly advised and in many states is required by statute. Your lease terms and conditions should require the tenant to sign and date the move-in checklist regarding the condition of the unit at move-in date. The tenant should be advised that the same checklist will be used at time of move-out to determine if the rental unit was returned in the same good condition. It can be helpful to provide the tenant with a copy of important need-to-know rental practices such as trash and garbage collection and disposal, parking rules, laundry facilities, or other information that was covered during orientation to help the tenant get settled.

A strong lease agreement should be strongly enforced. The new renter must meet lease terms and conditions, community rules, and must know what happens when he violates his lease including legal action for material violations of lease terms. The lease agreement terms and conditions and the landlord’s rental rules help protect the tenants, the neighbors, and the property. If rules are not enforced or lease defaults are allowed to go without notice and correction, the safety and security of other tenants could be at risk.

Renter insurance coverage is another way to protect both you and your new renter. As allowed by the state’s landlord-tenant laws, you should require the renter to purchase renters insurance as a condition of tenancy. You should remind the renter that landlord insurance coverage does not protect a tenant against liability claims related to a rental or cover the tenant’s personal possessions. It is the tenant’s responsibility to protect his possessions against loss or destruction and to defend against claims of personal liability for injury to other persons or property damage.

Document everything related to the tenant and property that is relevant to the tenancy. This would include the rental application, screening reports, applicant interview notes, lease agreement, supplemental documents, tenant orientation details move-in/move-out inspections and checklists, maintenance and repair requests and completed work services.

It can be helpful to contact the new tenant after tenant is settled in but before the first rent is due to answer any questions or provide assistance or instructions as needed.

Risk Management Practices in Tenant Screening

July, 2019

Due diligence in evaluating the business risk of a rental applicant requires the use of tenant screening as a core practice in business risk management policy.

Tenant screening assesses the applicant’s potential future risk of material default of lease terms and conditions that would result in financial loss to the landlord if the applicant were to be offered tenancy.

High risk tenant behaviors such as non-payment of rent, nuisance disturbances, property damage, and direct threats to the safety and welfare of others are liabilities that a landlord cannot afford to take on. Such behaviors are costly, time consuming, and bad business. If risk cannot be avoided, there must be a risk reduction policy that helps minimize business risk. Legal and sound business rental qualification standards, aka, your tenant screening policies, help reduce known likely risks and avoid potential risks not even yet considered. With that in place, strong lease agreement terms and active enforcement of rental policies will help protect the landlord’s business against bad tenant outcomes.

A landlord has a duty of care responsibility to his tenants to protect them from known risks to persons and property. Tenant screenings analyze certain aspects of financial, criminal, and public records of the applicant being considered. While information provided by these screenings is used for primary risk analysis, there are additional tenant screenings that a landlord conducts to support and complement contracted tenant screening services.

The due diligence of duty of care in screening applicants extends to the landlord performing his duties in analysis and evaluation of applicant furnished information. The landlord’s application form, the applicant personal interview, verifications, and references disclose applicant personally identifying data must be kept secure, confidential, and used only for permissible business purposes. Landlord verifications of employment and income, and reference checking are important practices in tenant screening risk-based assessments. The following information has been excerpted from various articles in our Tenant Screening Guides.

Verifications of Employment and Income

An applicant must prove he can meet rent terms and conditions by submitting documentation of current employment and proof of income at time of application.

Verifying an adequate source of income that the applicant will use to pay rent is important to determine whether the applicant has the financial ability from a sufficient, stable income source to pay timely rent. It is a good practice to verify the applicant’s employment and income early in the tenant screening process. If the applicant cannot qualify under the landlord’s financial criteria, there is no need to proceed with other screening reports.

Verification of an applicant’s financial ability to pay rent is a part of the landlord’s responsibility of duty of care to protect his property and his tenants. Some potential tenants overestimate their ability and means to pay rent in a timely manner. A landlord cannot afford to accept at face value the income amount the applicant enters on the application form. Verification begins with independent confirmation of the applicant’s employment and income.

In general, a landlord can request whatever financial information is required to confirm the applicant’s ability to pay under the landlord’s legal, business supported rental criteria, provided the same requirements are demanded of all applicants. For rental housing, the most common income qualification standard is a 3:1 ratio of gross monthly income to monthly rent. However, depending on various issues regarding applicant income sources, income tax matters, and unusual debt, it is sometimes necessary to consider an applicant’s details of other financial matters rather than only gross income.

There are many sources of income that may be used for rent payments. Wage earnings are the most common type of source of income and can be easily verified by a landlord.  Non-employment income must be considered on a case-by-case basis with a verifiable document, appropriate to the source of income, such as an official statement of receipted funds and statement balances.

Landlord References

Reference checking with previous landlords is an essential tenant screening. There is no better source of direct information regarding an applicant’s relationship with a previous landlord and neighboring tenants.

A landlord wants a stable, responsible tenant who is ready and willing to pay rent as agreed, maintain the rental premises to acceptable standards, and conduct himself as a good neighbor. Who could be a better source to confirm the applicant met these standards than his former landlord?

If past behaviors give indications of expected future behaviors, then past rental behaviors are key to risk assessment of a future tenancy. Former landlords can provide the type of information needed to assess potential risk. While the applicant’s interview and his application information may preliminarily qualify him to rental standards, details of a previous tenancy as provided by the landlord may tell a different story.

Reference checking is a simple step but some landlords skip over this critical screening, thinking it unnecessary if the credit report is satisfactory. Calling landlord references to determine whether the applicant satisfactorily fulfilled his lease obligations is a business safeguard. Failing to conduct all due diligence on applicants has the potential for claims of liability and negligence.

Current Landlord

An applicant may request that the current landlord not be contacted. The applicant may not have given notice or may not want the current landlord to know he is looking. There is also the possibility that the applicant thinks the current landlord will give unfavorable information, which may or may not be justified. While the request is understandable, the landlord should adhere to his stated tenant screening policies.

If one exception is made, other exceptions might follow or an applicant might think that the landlord is discriminating against him. However, the timing of the decision to contact the current landlord could depend upon whether the applicant meets other qualification criteria. If the applicant fails to meet minimum criteria there is no need to continue the process. If the applicant meets criteria, the current landlord should be contacted. Any information obtained from the landlord interview would be analyzed with information obtained from other screening reports for final evaluation.

No Previous Rental History

An applicant applying for his first rental does not have a rental history to check, but that does not mean the applicant is automatically disqualified from renting or potentially less qualified than a tenant with years of rental history. A landlord must look to other references to qualify the applicant. Commonly these other types of references are work references and personal references.

Former Landlords

If the applicant has been a renter for several years, calling former landlords may provide more honest answers to questions about rental behaviors. The tenant moved on but his records and his reputation likely remained with the landlord.

While some former landlords could be hesitant to provide detailed tenant information due to privacy concerns, a landlord should be able to confirm dates of tenancy, rental amount, and the security deposit amount.

Information obtained through landlord references should be assessed against information obtained through other types of tenant screenings. A landlord must keep an open mind regarding any mention of personality conflicts, subjective feelings, or personal preferences as expressed by a former landlord. A positive reference by a former landlord does not necessarily mean a trouble-free tenancy. A decision to offer tenancy must be based on all objective data collected by the landlord’s tenant screening process.

Checking references with previous landlords is an essential risk assessment tool and perhaps the strongest predictor of an applicant’s future rental behaviors. A landlord must however evaluate an applicant’s qualifications using a variety of tenant screenings, not just one type of assessment. By using multiple types of screenings, if the tenant has been a problem tenant in the past there will likely be red flags that show up in other screenings.

Personal References Screening

Contacting applicant supplied personal references is often an under-utilized screening tool.  Many landlords express the opinion that personal references provide little value in the tenant screening process and are therefore a waste of landlord time.  Persons contacted as personal references may be reluctant to offer information or information shared during the screening may be biased in favor of the applicant or not relevant to a housing decision.

Most applicants are not likely to provide the name of someone who would give a bad reference. The fact that information obtained from personal references can be difficult to quantify and assess in objective terms also leads some landlords to use this source of information infrequently.

The value of personal references as a screening tool incorporated into the full screening process should not be readily dismissed. By contacting personal references the information supplied by the applicant can be cross-checked with the reference’s responses. This allows the landlord to help determine the truthfulness of the applicant’s statements as well as to identify red flag issues that may indicate potential problems.

While some landlords may consider personal references to be self-serving for the applicant, personal references should not be overlooked as a good source of information. In some circumstances, e.g., when first time renters and students are entering the rental market, and former homeowners are returning to the rental market, the information provided by personal references can make a difference in decisioning if insufficient data is returned from other screening sources.

Personal references serve a different purpose than landlord references. A personal reference should be an individual that has never rented to the applicant. Personal references are character references offered by family, friends, business associates, community leaders, or others who can personally vouch for the applicant. A reference from an individual who has had a long-term relationship with the applicant can provide meaningful knowledge of an applicant’s character.  A reference from a parent may provide different information which is more protective of the applicant’s character.

The contact information of personal references may prove to be of help at a future date if the applicant becomes a tenant, but cannot be reached for legal service or in case of an emergency. Personal references listed by the applicant may be of help in the landlord contacting the tenant as necessary.

 

Documentation

Written documentation of verification of employment and income and reference screenings should be kept in the applicant file to substantiate the housing decision and defend against applicant claims of discrimination.