An insurance product that helps compensate a landlord for loss of income in the event that a rental property become uninhabitable due to a covered loss – e.g., storm damage or fire damage – is available from many business insurance companies. This type of coverage may also be called a Loss of Income Policy, Rent Loss Policy, Fair Rental Protection Insurance, Business Interruption Coverage, Business Income Insurance or another designated product name by the insurer.

A landlord’s standard property insurance policy pays for property damage that occurred as a result of a covered event. A standard policy does not compensate a landlord for the financial damage caused by tenants being relieved of their obligation to pay rent when their rental unit is damaged and becomes uninhabitable. A landlord in this situation suffers loss of business income. A loss of rents coverage would compensate the landlord for the revenue the landlord would have earned had the covered event not occurred.

You should check with your current insurance carrier to determine if loss of rents coverage is included in your landlord package or whether it is available as an add-on to your basic policy. You need to know if the loss of rents coverage is based upon the fair rental value of the rental property (as determined by the insurance carrier) or is based upon the tenant’s actual rent amount at the time of the event. In a situation where the tenant is paying above market rent, you will likely be out the difference between the actual rent and market rent.

You may also want to determine if there is language in the loss of rents policy (whether included in your landlord package or as the separate add-on policy) that may cover your continuing operating expenses on the rental unit until such time it can be returned to the tenant for occupancy. Some mortgage lenders require a landlord to carry rent loss insurance in addition to the requirements for property and liability insurance. This is another reason to confirm your current coverages with your insurance agent.

Rent loss coverage does not cover lost rents due to vacancies, evictions, or ordinary tenant turnovers. Damage to rental property due to owner negligence will not be covered.

Unless the lender required earthquake insurance, each property owner must assess the risks of going without the coverage vs. the cost of the coverage. The risk of earthquake damage depends on the location of the property, the type of property, date of construction, and the improvements made after construction specific to reduction of damages.

It should be obvious that earthquakes can have different magnitudes and occur at different distances from a property. In general, as either the magnitude goes up or the distance decreases, the severity of shaking increases. Those residences that are relatively close to an active fault are more likely to suffer damage, although there can be exceptions due to numerous reasons. For a well-built wood-frame house or other building, the deductible will generally exceed the structural loss for most moderate earthquakes. Due to good design, in recent earthquakes the damage to structures is a smaller part of the total loss than the damage to contents.

There are various possible improvements that will prevent or at least reduce impact of certain types of potential damages. Many improvements are relatively inexpensive compared to the protections afforded. For example, about $25 will greatly reduce the chance of an earthquake causing the hot water heater to tip over and both irreparably damaging the heater and damaging pipes, resulting in also extensive water damage.

Earthquake insurance is catastrophic insurance and therefore deductibles are relatively high. Deductibles are generally in the form of a percentage rather than a dollar amount. Deductibles may range anywhere from 2 percent to 25 percent of the replacement value of the structure. It may be possible that owners can get even higher deductibles to save money on earthquake premiums.

The insurance pays only for damages that exceed the deductible. Some earthquake policies treat contents and structures separately. This means the deductible amount applies separately to the:

• Total amount of the loss for contents
• Total amount of the loss for the structure
• Total amount of the loss for unattached structures like garages, sheds, driveways or retaining walls

Not all policies are alike. You should compare the coverage differences between companies to get the coverage that best meets your needs.

Premiums vary widely by location, insurer, the type of structure that is covered, and, of course, the deductible amount. Generally, older buildings cost more to insure than new ones. Wood frame structures generally benefit from significantly lower rates than brick buildings because they tend to withstand quake stresses better. Regions are graded on a scale of 1 to 5 for likelihood of quakes, and this may be reflected in insurance rates offered in those areas.

Although an earthquake is the first thing that comes to mind when someone mentions earth movement, this very broad category also includes landslide, mudslide, mudflow, sinkhole, or any other movement that involves movement of earth. Loss caused by these hazards may be covered if the damage resulted from an earthquake. An earthquake endorsement generally excludes damages or losses from floods and tidal waves – even when caused or compounded by an earthquake.

What can a landlord do if he/she suspects a tenant has abandoned the rental unit? Being unsure whether the tenant is really gone for good or intends to come back to occupy the rental unit leaves the landlord at a disadvantage.

An unannounced departure by a tenant creates problems for a landlord in retaking possession of the rental unit. Additionally there may be issues of disposition of tenant personal items left behind in the unit. If not handled in the appropriate legal manner according to state statutes for abandonment of rental premises, a landlord could potentially be subject to claims by the tenant that the landlord violated the tenant’s rights to privacy and enjoyment of the rental unit, claims of damage, destruction or unauthorized removal of tenant personal possessions from the unit, or claims of damages and suffering as a result of a landlord’s lock-out of the tenant from the unit without cause.

Tenants can disappear for a variety of reasons. Many times a tenant leaves because of money problems, such as past due rents, or lease violations and skips out ahead of being evicted. Tenants have personal reasons to leave unexpectedly, such as family issues, job duties, or an extended vacation. Perhaps, a single occupant may have had a medical emergency requiring hospitalization. A landlord will need to establish the reasonable belief that the rental unit has been abandoned by the tenant.  The landlord cannot make an assumption regarding the tenant’s intent and action in absenting himself from the rental unit nor guess whether the tenant will return. The tenant may truly intend to return to the rental unit but has failed to communicate his absence and future plans to the landlord.

Most states address the issues of abandonment of real and personal property through specific statutes including notice requirements and waiting periods to be followed if a landlord believes a rental unit has been abandoned and/or tenant personal property has been left behind in the unit.

While each state may differ in how the statute addresses the issue of abandonment and requirements for regaining possession of rental property, in general, landlords must make an effort to investigate and establish reasonable belief for tenant abandonment of the rental unit.

An important consideration before assuming abandonment is whether the tenant is current in his rents. If the tenant is current with rent, many states do not consider a unit to be abandoned. The tenant is absent from the unit but still legally in possession of the unit as long as the tenant has not violated lease terms and conditions. Abandonment must be proved by investigation of the matter.

There may be red flag indications that the unit is no longer occupied but the landlord does not have the legal right to immediately retake possession of the unit. The most simple and direct way to determine the circumstances of the matter is for a landlord to make reasonable effort to contact the tenant and ask the tenant if the tenant is coming back to occupy the rental unit. If the tenant responds that he does not intend to return, the landlord should request the tenant document in writing that the tenant has permanently moved out of the rental unit with no intention to resume the tenancy. With the tenant’s signature and date the document serves to transfer possession of the unit from the tenant back to the landlord. If the tenant cannot be reached or reached in a timely manner, to establish reasonable belief of abandonment a landlord may take steps such as:

• Entry and inspection of the rental unit as a health and welfare check. Complying with statutory requirements for landlord entry for permissible purpose, a landlord can conduct a brief inspection of the unit to determine if the unit is unoccupied, whether tenant personal possessions are still in the unit, whether utilities have been shut off, whether there is evidence of physical damage or safety issues, or whether tenant pets have been left unattended. For the landlord’s protection it is advisable for a third party to accompany the landlord during the inspection to act as the landlord’s witness as to the condition of the unit. Appropriate, reasonable action must be taken to safely shelter any pets that have been left behind as well as preventative measures taken to protect the unit and its contents from damage until further investigation and resolution can be made.
• Contacting neighbors to determine if they have any information regarding the tenant’s absence or have noticed evidence of the tenant moving out.
• Speaking with the tenant’s emergency contact to determine if he/she has information regarding the tenant’s plans, knowledge of tenant’s move-out, or forwarding information for the tenant.
• Determining if a change of address notice has been submitted to the post office. A landlord may choose to send a letter to the tenant with return receipt requested with notification of the address where the letter was delivered.

There could be unusual circumstances that underlie an extended absence by the tenant. The landlord must make a good faith effort to consider a number of factors before concluding the rental unit has been abandoned.

Many states require the landlord to notify the tenant regarding the belief of abandonment in order to officially establish abandonment and terminate the lease. In those states a landlord must provide the required official notice using the required delivery method to the tenant at the tenant’s last known address regarding the landlord’s stated belief that the property has been abandoned. The official notice gives the tenant a respond by date to refute the property has not been abandoned. If there is no response, the lease is terminated and the tenant is held responsible for payment of unpaid rent and fees and for any damages.

The landlord may use the tenant’s security deposit for unpaid rents, fees, or property damages. If the amount owed exceeds the amount of the security deposit, the landlord will need to file a claim in a small claims court for the balance due.

When a lease is terminated a landlord must secure the rental unit by changing locks and taking appropriate steps by statute to remove and store the former tenant’s personal possessions that were left in unit.

Many states have abandoned property statutes and the requirements greatly. They generally require landlords to provide written notice to tenants regarding the handling of tenant property that was left behind. The notice typically includes:

• A detailed inventory of the property abandoned,
• An estimated value of the abandoned property,
• The address of the storage facility where the property may be claimed,
• The deadline set by state statute to reclaim the property,
• The final disposition of unclaimed property specified by state statute.

State statutes will provide guidance on what to do if the tenant does not respond to the legal notice within the designated timeframe. As examples, in some states landlords may discard the property, arrange for sale of the property to apply against the costs of storage, donate the property to a non-profit organization, retain the property for landlord use, or surrender the property to a designated state agency.

It is a landlord’s best practice to document the reason(s) why the landlord suspected the rental unit had been abandoned and what actions were taken to recover possession of the rental unit and final distribution of tenant personal possessions left in the unit. In the event of a wrongful lock-out claim by the tenant the landlord can present evidence of a reasonable belief of abandonment of real and personal property.

Adequate documentation could include the date of the tenant’s last rent payment, landlord notices of lease default, or pending eviction action. Additionally when conducting an inspection of the rental unit, a landlord should document the condition of the rental unit including photos of conditions such as spoiled food, garbage and trash, unsafe or unsanitary conditions, or abandoned pets. Interviews with neighbors and emergency contacts should be documented with date, time, and a summary of discussion. Copies of official notices including delivery method that were sent to the tenant should be kept in the tenant’s file. Information should also be kept regarding utility shut-off notices, and storage receipts and invoices.

Tenants have a right to know whether rental properties have a history of bed bugs. Some states and local jurisdictions have specific laws requiring landlords to disclose a property’s bed bug history. If the landlord fails to disclose or misrepresents the property’s bed bug history, tenants may be able to employ legal remedies such as breaking the lease, withholding rent, repair and deduct expense as allowed by statute, and/or filing a lawsuit against the landlord for damages and distress if the tenant later suffers harm from an infestation in the rental unit.

Landlords in most states are prohibited from renting units that the landlord knows or suspects has a current bed bug infestation. For example, the state of Maine has a required landlord disclosure that must be provided to a prospective tenant before renting a unit, the landlord must disclose to a prospective tenant if an adjacent unit(s) are currently infested with or are being treated for bed bugs. Upon request from a tenant or prospective tenant a landlord must disclose the last date that the unit the landlord seeks to rent or an adjacent unit(s) were inspected for bed bugs and found to be free of a bed bug infestation. New York City administrative code requires an owner to furnish to each tenant signing a lease an approved notice that sets forth the property’s bed bug infestation history for the previous year regarding the rented premises and the building in which the premises are located.

Comprehensive bed bug legislation has been passed by many states and some cities to prevent, manage, and control bed bug infestations. In states with bed bug laws, landlords must incorporate specific additional policies for disclosure and mitigation of bed bug infestations.

You will need to conduct due diligence of applicable bed bug laws and regulations that govern the location of your property to determine specific legal obligations. Research your state landlord-tenant statutes on bed bug identification, treatment, and disclosure requirements to tenants or prospective tenants to understand and develop an appropriate bed bug prevention and management plan. It is important to take tenant claims seriously and respond appropriately in a timely manner. Prompt inspection and response by a professional pest management company will determine the type and extent of a pest infestation and associated treatment.

Prevention of bed bug infestations is less costly than costs associated with treatment of existing infestations. This is particularly true in multi-unit housing that can be more vulnerable to pest infestations. Prevention and early detection of bed bug infestations can help stop bed bug populations from spreading to multiple units. A bed bug infestation once established in a rental unit requires aggressive actions to control and eliminate the infestation.

For landlords and property managers of multi-unit housing with recurring tenant turn-over, tenant education on bed bugs should be an ongoing task to help prevent infestations and to control treatment of existing infestations. Tenants should know how to identify signs of a bed bug infestation and how to promptly report problems. To provide the necessary information to tenants, landlords must be themselves knowledgeable in bed bug prevention methods, pest identification, detection, treatments, and have proactive measures in place to mitigate risk to tenant health and property damage.

Bed bug information is readily available from a number of printed and media sources. In some states, landlords may be required to provide educational material to tenants and applicants. Dismissing or ignoring tenant complaints about bed bugs can create liability issues for matters of habitability, health, safety, and negligence which could result in future litigation and/or government intervention.

Educating tenants before there is a problem helps to prepare a tenant if a problem does arise. Having tenant cooperation is important for coordination of treatment of an infestation in the rental unit and the subsequent monitoring of treatment effectiveness.

The effectiveness of a bed bug remediation program will depend upon prompt tenant reporting of the problem and quick landlord response for inspection and treatment by a qualified pest management company experienced in bed bug control. Self-help methods such as the application of insecticides are rarely effective in the control and elimination of an infestation and can even result in landlord liability for tenant health problems.

Who can be held responsible for pest control in a rental unit depends upon applicable state and local laws and terms of the lease agreement. You should research your state statutes and local ordinances regarding what maintenance and repair responsibilities can and cannot be transferred to tenants. A single family rental property may have different regulations than does a unit in a multi-family property.

In general, many states hold the landlord legally responsible for health, safety, maintenance, and repair issues. A landlord has a duty of care responsibility to protect people and property. A pest infestation causes serious health issues for tenants as well as property damage if the infestation is not quickly identified and treated appropriately.

A landlord, by trying to transfer responsibility for health, safety, or maintenance and repair issues to a tenant, even when the responsibility is specifically addressed in the lease agreement, could create liability if the tenant objected to the lease terms and conditions and filed legal action against the landlord. In almost all states, the landlord is held responsible by the legal doctrine of the implied warranty of habitability to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease. Landlord inspections of the rental premise for health and safety reasons cannot be waived.

In some states, responsibility for pest control and many other maintenance items can be transferred to the tenant of a single-family residence as long as specifically addressed by the lease agreement and detailed in tenant duties and responsibilities. However, the landlord must be sure that anything transferred to the tenant was in good working order when the tenant moved in. In the case of pest control, this can be difficult to determine as existing pests may not be obvious at the beginning of a tenancy. Pest problems can depend on the season, environmental factors such as weather conditions or excessive moisture, location of the rental unit, physical condition of the structure, and general housekeeping practices. The landlord would gain some defense against tenant claims of pest infestation at move-in by a practice of having a professional pest control company inspect the property and perform necessary extermination and/or preventive treatments before a new tenant moves in.

A consideration against transferring pest control responsibility to the tenant is whether the tenant will satisfactorily perform according to the lease terms and conditions regarding pest control. A landlord must be very specific in his instructions for pest control duties and responsibilities – that is, whether professional pest control services must be used, landlord notification of inspection, authorizations required for  treatment, documentation of services and treatment, copy of paid invoice , etc. Documentation of inspections and treatments should be required by the landlord and may be needed for landlord compliance with health and safety responsibilities by housing codes, and legal disclosure requirements.

Return of the tenant’s security deposit and the accounting for amounts retained by the landlord can often be a source of dispute between the landlord and the tenant upon the tenant’s move-out. A tenant expects to have his full security deposit returned. The landlord may find the condition of the unit requires deductions for cleaning and repairs. The discussion that ensues can leave either party dissatisfied, disgruntled, or ready to take legal action.

To help avoid disputes, there are certain steps that can be taken by the landlord to help the tenant understand tenant duties and obligations at the expiration of the lease term. Tenant compliance with lease terms and conditions at end-of-term can help in minimizing deductions from the tenant’s security deposit. Of course the tenant’s good care of the rental property during his tenancy is also a factor in the final inspection report and determination of applicable deductions from the security deposit.

By requiring tenants to provide written notice of intent to vacate as specified in the lease agreement, a landlord can begin preparations for the upcoming vacancy. Additionally the notice provides the landlord the opportunity to communicate to the tenant detailed instructions for the move-out. A tenant by following the move-out instructions can help protect the refund of his security deposit from unnecessary deductions.

After receipt of the tenant’s notice to vacate, the landlord should confirm the tenant’s stated departure date in a move-out letter. In the letter the landlord can review the lease terms and conditions for tenant move-out. It is expected the rental unit will be left in the same condition as it was at time of move-in except for ordinary wear and tear. A signed copy of the move-in inspection and checklist should be attached to the letter to serve as reference for cleaning and housekeeping duties. The move-out inspection will use that same checklist to note the condition of the unit at time of move-out. By providing the inspection and checklist, the landlord provides the tenant with yet another opportunity to help protect the return of his full deposit.

In the move-out letter, a landlord can remind the tenant of other duties and procedures that are part of the move-out process. As examples, the move-out letter might contain:

• A summary discussion of the move-out inspection procedures. This should include a reminder that all personal possessions must be removed from the premises prior to inspection.
• A reminder that the lease agreement prohibits using the security deposit as the last month’s rent.
• A reminder that the lease agreement gives the landlord and the landlord’s agents the right to show the unit to prospective tenants or to schedule contractor work upon reasonable notice per statute.
• A statement of the landlord’s expectations that the unit will be cleaned and left in the same condition as the tenant found upon moving in.
• An instruction regarding date and time of the move-out inspection.
• An instruction for return of keys, garage door openers, gate keys, and pool pass, as appropriate to the rental unit.
• An explanation of how the security deposit refund will be handled including reference to the applicable state law for accounting and return of the deposit.
• A request to the tenant to provide a forwarding address and contact information for future communications and for mailing of the check for the portion of the security deposit being returned and an accounting of any amount not being returned.
• An itemized list with instructions on how to meet the landlord’s cleaning standards and what items on the move-in checklist are the items of priority.

A detailed move-out letter can set the stage for a satisfactory final inspection. With adequate instruction and information, the tenant should clearly understand his duties and the landlord’s expectations. Performance of those duties according to landlord standards should minimize the chance that a deduction for cleaning costs would be taken from the tenant’s security deposit.

The final inspection should take place after the tenant has removed all personal possessions from the unit and the tenant has notified the landlord that the unit has been cleaned to the level of cleanliness that the tenant intends. A vacant unit will reveal any damage to the unit caused by the tenant during occupancy or removal of personal possessions from the unit.

The documented move-in inspection report is the basis for the move-out inspection. The move-out inspection cannot be more restrictive than was the move-in inspection.  Some states have special rules and requirement for move-out inspections and use of checklists. In a few states the tenant must be provided a pre-move-out inspection. The landlord will note property defects that the tenant needs to correct if the tenant wants to maximize his deposit refund.

Some landlords conduct the final inspection of the unit on their own and only send an itemized statement and deposit balance to the tenant. In a few states the landlord is required to conduct the final inspection of the rental unit with the tenant being present. This may be a better practice overall to allow the tenant to observe and ask questions regarding potential deductions from the deposit. The tenant should be allowed to give his side of the story before a deduction is made. A joint inspection can avoid the potential unpleasantness of surprising a tenant who anticipated receiving his full deposit back. Inspections should always be documented in writing with photos or video taken to support the condition of the unit at move-out.

Some tenants may ask for a chance to do additional cleaning or repair damage before the final itemization of the security deposit. In a few states a landlord is required to offer the tenant a second chance  at cleaning before cleaning costs are deducted from the security deposit. As a goodwill gesture, a landlord may consider offering a tenant a second chance, particularly if there are mitigating circumstances, they have been good tenants and the landlord can expect them to perform to standards. A landlord should be cautious in allowing a tenant to repair damages to the unit. There is potential liability to the landlord for future claims if a new tenant suffers injury or damage as a result of poor or defective repair work by the vacating tenant.

The procedures for the handling, accounting, and return of security deposits vary by state. Due diligence is required for the specific state requirements but in general, a landlord will be allowed to take deductions from a tenant’s security deposit for cleaning costs outside of normal wear and tear, repair costs for damages to the property, and unpaid rent.

The time allowed by statute that the landlord has to return the security deposit can range from a “reasonable time” to a maximum of 60 days. Statutes further require a landlord to itemize and return the deposit within the specified timeframe.

Many deposit disputes between landlord and tenants occur over costs for cleaning and repairs. Generally a landlord can charge for cleaning and repairs necessary to restore the rental unit to the move-in condition. A landlord cannot deduct for costs of ordinary wear and tear. The costs must be a reasonable and fair price for the type and amount of work performed.

A landlord cannot charge the tenant for damage that was present at move-in, replacing an item when a repair would be sufficient, or cleaning when 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 on 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.

An applicant for an available rental unit must prove he/she can meet rent terms and conditions. To do so, the applicant must submit documentation of current employment and proof of income at time of application.

A rental information packet that details the landlord’s rental policies and procedures including income standards can be helpful to prospective applicants to quickly determine if their income will qualify to stated requirements.

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 stable income sufficient to pay timely rent for the term of the lease. 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 amount of 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.

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 documentation, appropriate to the source or sources of income, such as an official statement of receipted funds and statement balances. A good business practice to verify income is to require a primary source document and a secondary supporting document for the type of income that the applicant will use as the source for rent.

As the first step in the verification process, a landlord should request appropriate documentation regarding the applicant’s income.

W-2 Employment   

Proof of current employment and wages or salary income for applicants can be verified by (1) the applicant providing copies of the last several paycheck stubs, and (2) the landlord’s direct confirmation of the applicant’s employment status by the employer either in a written document or as documented in a telephone conversation. A landlord may request a copy of the applicant’s previous year W-2 income statement for comparison of last year earnings to projected earnings for the current year. In certain circumstances a landlord may request a copy of the applicant’s filed tax return for the previous year.

As should be stated in the rental information packet offered to rental prospects, applicants should be prepared to provide copies of paycheck stubs, the W-2 form, and authorize consent to their employer to release an employment verification letter to the landlord.

A letter from an applicant’s employer can serve as proof of income and as a letter of reference for the applicant. The confirmation of employment information in the letter should agree with employment information given on the application including employer name and address, applicant name and current address, the applicant’s job title or job position, length of employment, and as permissible, wage hourly rate, standard work schedule or confirmation of a salaried position.

The base rate of pay and scheduled hours per pay period should be used for income qualification. Overtime hours and/or bonus pay should not be used in determining annualized income due to variances in amounts and frequency that are not control by the applicant.

Self-Employment

A 1099- Miscellaneous Income Form (1099-M) is used to report earnings of individuals who are self-employed. While it may be of benefit to the landlord to request copies of the applicant’s 1099-M forms, a landlord must keep in mind Form 1099 reporting requirements. A 1099 does not need to be prepared if the amount of payment is less than $600 for the year. A self-employed individual has the obligation to report all self-employment income on his tax return but may not receive a 1099-M form from all employing entities and individuals. A landlord instead can request the applicant provide copies of the previous two years filed tax returns to document his income. A landlord could also request copies of the applicant’s bank statement as a supporting document to show recorded transactions of income deposits.

Commission/Bonus/Incentive Based Employment

An applicant whose income comes from commissions or incentives will need to provide the landlord with copies of appropriate documents that support the source of income. A landlord may need to review copies of tax returns, bank statements, 1099s, or other supporting documents.

Other Sources of Income

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

Although not commonly used as sources of income for rents, an applicant may plan to use funds from a Workman’s Compensation award, severance payment from an employer, or state Unemployment Benefits. A landlord should carefully analyze documentation provided by an applicant regarding the use of these types of funds. Oftentimes the benefit award period is a short duration or a lump sum amount was awarded. Additional verifications may be needed to determine particulars of awarded benefits and the balance of funds remaining in account that can be distributed.

Cash

In some circumstances, a cash economy is a generally accepted means of payment for a variety of goods and services. Accepting cash for rent payments may not be in the landlord’s best interests for many reasons. A landlord should be cautious in qualifying a prospective tenant who wants to pay his rent in cash. Cash only employment may present problems because most cash employers may not be willing to furnish documentation of employment and proof of cash payments. If a cash-only worker can provide adequate documentation of his cash earnings – e.g., tax returns that were most recently filed – and a written statement from his employer of the likelihood of steady future income on a cash basis, a landlord may choose to conditionally accept the applicant’s source of income and continue further tenant screening.

Verifications

As discussed above, paycheck stubs, W-2 income statements, Form 1099-M, and the employment verification letter can serve as verification instruments to document employment income sources.

Bank Statements

A landlord may request copies of the applicant’ bank statements for a specified number of months, usually three to six months, to establish an income history. Bank statements can be supporting documents to confirm paycheck and other income deposits, determine cash reserves, view itemized transaction history including bank overdrafts and returned items, and view account balances.

Tax Documents

The federal income tax Form 1040 can be a supporting document for proof of income from taxable sources. In some circumstances, a tax return may be the only way to prove verifiable income. If tax returns are requested by the landlord, it is suggested that the previous two years of tax returns be provided by the applicant.

The forms W-2 and 1099-M are tax reporting documents that can be used in lieu of tax returns because the forms document year-end income information.

Additional Considerations

When qualifying an applicant’s income, verifying source of funds, and confirming employment, a landlord should closely inspect the applicant’s verification documents to make sure the name and address shown on a document match the applicant name and address on the application form and as verified with identity documents presented at time of application.

A landlord must also take into consideration housing costs related to the subject rental unit in addition to the rent, as well as other monthly debt obligations seen from the credit report for the applicant, as large income is sometimes offset by large required debt payments and the net of the two must be what is considered when determining an applicant’s financial qualification.

By conducting appropriate due diligence in verifying that an applicant meets income requirements  a landlord can avoid installing a tenant who cannot meet his rent obligations and potentially must be evicted from the rental property.

Your first response should have been a call to your plumber to determine how quickly a new water heater can be installed. A failure to provide a tenant with hot water within a “reasonable” time after failure of the water heater could be a legal issue of habitability. Next day service to install a new heater may seem reasonable to you and might be reasonable to the tenant depending upon his household situation. There could be extenuating circumstances in the tenant household that might require an emergency replacement service call. If the household contains children, a family member who is ill, disabled or requires special care, the better response would be to pay for the cost of an emergency replacement service call. While the tenant/household may incur some inconvenience because of the service call, in the long run it is better to attend to the issue with immediate service. Be sure to follow statute requirements for notice of entry to the tenant to conduct an emergency repair.

The tenant may expect some form of compensation for the inconvenience and loss of agreed upon services. A frank discussion of the matter and its resolution should allow you and the tenant to reach an agreement on what is fair and reasonable compensation.

Landlords usually provide major appliances such as a refrigerator in rental properties as a benefit and convenience for their tenants. The lease agreement should specify what appliances are provided for the tenant’s use during the tenancy. The lease should further specify appliance maintenance and housekeeping responsibilities for both landlord and tenant. As part of the regular inspection of the rental unit, a landlord should inspect all appliances to ensure they are in good working order. The tenant should have been fully instructed on the appropriate use of appliances including cleaning. Neither landlord nor tenant have control over the useful life of an appliance and can predict when an appliance may break down.

A tenant has the duty to notify the landlord in a timely manner when a major appliance quits working. A landlord has the duty to repair/replace the appliance in a timely and appropriate manner. In the case of the refrigerator breaking down, a landlord is responsible to repair or replace the non-working refrigerator but the food content inside the refrigerator is personal property of the tenant. The tenant should check with his insurance carrier for his renters insurance to determine what coverage the tenant has for personal property loss, in this case, spoiled food. For some insurance carriers, a claim for the loss of the food items can be submitted for reimbursement subject to the tenant’s deductible amount.

When the landlord has acted appropriately, there is no legal reason that the landlord must accept responsibility for personal property loss. In an effort to preserve an amicable landlord-tenant relationship, a landlord could offer to share some of the cost to replace the food items. For most tenant refrigerators as normally stocked, the cost of compensating for food that actually became unusable because of appliance failure would likely be so low that a landlord would be far ahead to negotiate a reasonable settlement with the tenant compared to the cost of litigation, in terms of both time and dollars.