A good beginning for a new tenancy starts with the tenant’s clear understanding of the tenant’s obligations under landlord-tenant statutes and the landlord’s lease agreement. Both landlord and tenant have legal rights, responsibilities and duties. There can be no assumption on the landlord’s part that a new tenant fully understands his tenant duties and responsibilities. It is incumbent upon the landlord to provide information to the new tenant to help the tenant perform to rental standards and fulfill tenant obligations. It is to the landlord’s benefit to provide instructions to the new tenant to ensure property management health, safety, and security standards are maintained in compliance with the landlord’s duty of care to his tenants. A new tenant orientation helps the tenant to more quickly adjust to rental practices and get settled into his new home.

How tenant orientation is handled by a landlord may depend upon applicable landlord-tenant statutes, property type, property location, and business necessity. Landlord-tenant statutes will determine the requirements and the sequencing of events for new tenant move-in. As examples, in some states the landlord and tenant are required to jointly conduct the move-in inspection and checklist, while in other states the new tenant is responsible to inspect the rental unit, note conditions, and return the checklist to the landlord after tenant move-in. A few states do not require move-in inspections, but a landlord should keep in mind that a documented inspection of the rental property’s condition at move-in can help provide defense against a tenant’s potential liability claim at a future date. The type of property, such as multi-family housing, may require more detail regarding rules and regulations than would a single family residence. Large properties, properties in metropolitan areas, properties governed by rent control ordinances, and planned unit development properties may also have significantly different requirements for tenant orientation.

To deliver a consistent tenant orientation message in a non-discriminatory manner fully compliant with fair housing laws and other applicable regulations, a landlord may consider using a prepared script to ensure that all issues are covered in the same manner and detail with every new tenant. It is critically important that every tenant receive the same information in the same way to avoid possible tenant claims of discrimination and unfair treatment. The same rules and regulations must apply to all tenants at the rental community. Using a prepared script a landlord can ensure that the tenant is provided basic but important information on rental policies, rules, and regulations.

The following discussion assumes that the landlord is acting as his own property manager in conducting a new tenant orientation. Those properties managed by a professional property management company may have different procedures for conducting a new tenant orientation.

Key rental policies are discussed in detail during the review and signing of the landlord’s lease agreement. Rental Rules and Regulations and common housekeeping items are usually discussed during tenant orientation. A tenant “Welcome Letter” prepared from orientation materials should be given to the tenant at close of tenant orientation. A copy of the letter should be signed, dated, and kept in the tenant’s file as acknowledgment of orientation information and the tenant’s understanding that tenant duties and responsibilities are governed by landlord-tenant statue, lease agreement, and rental rules and regulations.

Orientation discussion items (with examples as needed) may include:

Landlord Identification and Contact information – The name of the rental business and the landlord name, address, phone number, and email address.

Emergency Contact Information – The name and contact information of a person authorized as a 24/7 emergency contact if other than the landlord or when the landlord is not available.

Defined Emergency – A situation that threatens harm to persons or property that would require response from emergency personnel such as medical, fire and police.

Business Hours and After-Hours Information – office hours for rental business, e.g., Monday to Friday, 9 to 4:30.  After-hours requests and questions may be referred to the landlord’s message service, the landlord’s website, or the tenant portal web address.

Renters Insurance Requirement – If not prohibited by state law, purchase of renters insurance is a requirement for tenancy. The tenant is reminded that the landlord’s property insurance does not cover the tenant’s personal property or tenant’s negligence in the event of theft, accident, fire, injury, or other harmful event.

Rents – Rent policies as referenced in the lease agreement should include (1) when rent is due, (2) the rent amount, (3) form of payment) (4) manner of payment, (5) grace period, (6) late charges, (7)  when late charges accrue, (8) NSF charges, and (9) other rent issues such as no post-dated checks.

Security Deposit – State landlord-tenant statutes regulate the collection, handling, and return of security deposit funds. At tenant move-out the security deposit will be applied to costs of cleaning, damages, and/or unpaid rent. A statement that security deposit may not be applied to the last month’s rent should be included within the lease agreement.

Security and Safety – Instructions for operation of door and window locks or other security measures should be provided. Tenant requests for additional safety devices or installation of alarm systems must be in writing and authorized per landlord requirements.

Inspections – Annual property inspection of unit and grounds is required with landlord providing reasonable notice for inspection per landlord-tenant statute requirements. Other inspections may be conducted for health and safety issues and as specified by local building codes or ordinances with advance notice to tenant.

Smoke Detectors/Carbon Monoxide Alarms – Smoke detectors and carbon monoxide alarms should be tested monthly. Tenants should never disable any detector or alarm unit. Tenant is responsible to replace batteries in units as required. Landlord should be notified promptly of any problems.

Fire Extinguishers – A fire extinguisher is provided for each rental unit.

Maintenance and Repair – The condition of the rental unit has been documented at the time of the tenant’s move-in. Tenant is responsible to keep the rental unit in good condition throughout the tenancy. The checklist may be updated during the tenancy if damages are discovered or repairs made to the unit. To maintain unit in good repair tenant should promptly report maintenance/repair issues to landlord. Tenant has been instructed in basic maintenance of appliances and equipment furnished with unit. Tenant has been instructed regarding operation of water shut-off valves and electrical panel breakers during property inspection.

If tenant is responsible for routine maintenance tasks, specific duties and instructions are detailed in the lease agreement.

Keys – The tenant is held responsible for the return of all keys issued at time of move-in. requests for additional keys or rekeying of locks must be made in writing to landlord.

Parking – Only listed and operational vehicles are allowed in designed parking areas. Parking of over-sized or utility type vehicles is prohibited.

Guests – Landlord written approval is required for long-term guest stays. Lease terms and conditions should be referenced for specific details.

Pets – Pets are only allowed with prior written approval from the landlord. Breeds or types of animals not covered by landlord’s insurance policy should be prohibited. Refer to the Pet Addendum for specific pet restrictions and requirements.

No Smoking – No smoking is allowed in rental unit or in common areas.

Laundry and Storage – Laundry facilities and storage areas are furnished as a convenience for tenants. Landlord will not be responsible for loss or damage incurred as a result of tenant’s use of facilities or storage.

Trash Removal – Information or instructions given for trash removal depending upon landlord or tenant responsibility. For example, if the landlord provides trash service, tenant can be advised of trash scheduled pickup day and recycling requirements.

Landlord Notifications for Entry – Landlord will notify tenant per requirements in landlord-tenant statutes for request to enter the rental unit according to permissible reasons by statute.

Move-Out Notification/Procedures – Tenant will notify landlord in advance (e.g., 60 days) of tenant’s intent to move at expiration of lease. Tenant will need to contact landlord for Tenant Notification of Intent to Move form and follow landlord’s policy for cleaning and return of unit to good condition to landlord.

Other Terms and Conditions in Lease Agreement – Reference should be provided to other lease terms and conditions that are of importance to the tenant for compliance with rental standards.

The goal of a new tenant orientation is to provide the tenant with the necessary information and instruction to understand what is expected of him and what he can expect from the landlord during the tenancy.

Whether the landlord or the tenant will be responsible for snow removal may depend upon the language in the lease agreement and/or state statutes and local ordinances that address the issue. The location of the rental property, the type of property, and the number of units in a multi-unit property may also determine landlord or tenant responsibility.

In general unless otherwise specified in the lease or by statute/ordinance, a landlord is generally responsible for snow removal in multi-family properties where there are common walkways and parking areas. In many states a landlord with multi-family properties is held responsible to maintain all means of egress at all times in safe and operable condition, including conditions of snow and ice.

Landlords of single-family rental properties may be able to transfer responsibility of snow removal to the tenant through appropriate language in the lease agreement. The lease agreement must comply with the state and municipal laws on snow removal and clearly define details regarding the time frame and manner of snow removal, including how soon a sidewalk must be cleared of snow and ice, applicable de-icing procedures for salt or sand, and how the snow must be stored on private property, not dumped back onto public property.

Even when the landlord can transfer responsibility for snow removal to the tenant, there is still a potential liability for the landlord in the event of a slip and fall lawsuit being filed. The liability laws in the state where the rental property is located would determine how the matter should be handled.

Unless prohibited by statute, your lease agreement should require the tenant to provide you advance notice of the tenant’s plan to be absent from the rental unit for a period of time expected to be longer than XX number of days. In some states the issue of tenant absence from the premise is specifically addressed by statue including the period of absence. Unless specified by statute, the number of days of consecutive absence may be determined by the landlord according to the perceived risk of an unoccupied unit. Many landlords use a period of 7 consecutive days or more of absence before requiring advance notification. You should research your state’s landlord-tenant statutes to determine your policy and required lease language.

In general the tenant’s notification to you of an extended absence from the rental unit provides a measure of safety and security for you, the tenant, and tenants in neighboring units of a multi-family property in the event of an emergency situation requiring access to the unit or determining the whereabouts of a tenant. As a duty of care to your tenants, you should have some knowledge of whether the tenant is in residence, on vacation, or has abandoned the premises. While winter weather conditions are usually of most concern to landlords regarding potential damage to unoccupied units, any time a unit is vacant or unoccupied for a period of time, there can unexpected incidents of damage – i.e., plumbing failures – which could be of consequence to the tenant, the tenant’s personal property, and the property itself.

A lease clause should always provide you the authority, as agreed to by the tenant, to enter the premises during the tenant’s absence in order to maintain the property as reasonably necessary and to inspect for damage and need for repairs. However, there should be legitimate business necessity to enter the rental unit to protect the property from damage. A true emergency is an event that threatens life or causes property damage if not immediately corrected. As a landlord you should use both caution and common sense to evaluate a situation for emergency entry. Fire, flooding, or an event caused by a natural disaster might be considered legal justification for emergency entry.

Some states allow a landlord to recover money from the tenant for incurred general or specified damages if the tenant fails to provide the legally required notice of an anticipated extended absence to the landlord.

A Winter Newsletter is a good way to provide tenants with helpful winter safety and maintenance tips that can help keep the rental premises in good condition and more energy efficient.

The newsletter might provide tips such as having the tenant:

• Inspect the rental unit for blocked or closed vents in living spaces. A heating vent could be blocked if furniture has been placed over or against the vent.
• Open any register vents or air returns inside the living spaces in the house. Vents may be wall mounted, in the floor or in the ceiling.

• Reverse the direction of ceiling fans to rotate clockwise to help circulate warm air that gathers near the ceiling. This will push the warm air down to lower areas.
• Keep the kitchen sink and bathroom vanity cabinet doors open so warmer air can circulate around pipes to prevent pipes from freezing.
• Use the exhaust fan above the stove when cooking.
• Run the exhaust fan in the bathroom during and after a shower to reduce moisture in the rental unit.
• Help reduce cold air drafts from entering living spaces at doorways or window sills by placing draft dodgers along bottoms of exterior doors and in window sills. Windows should be kept shut and locked.
• Replace furnace air filters on a regular schedule.
• Avoid using unventilated and unattended space heaters.
• Never using cooking stoves to heat living spaces.
• Test smoke alarms and carbon monoxide detectors regularly.
• Keep the heat on at the premise. Heat should be kept at a minimum of 55° at all times during the winter season. Do not turn off the heat at the property when leaving for holidays or taking a vacation during expected cold periods.
• Keep kitchen and bathroom warm water faucets slowly dripping to prevent pipes from freezing if the outside temperature is expected to fall below 20°.
• Know where the main water shut-off valve is located. If a water pipe bursts, shutting the valve could help minimize water damage.
• Don’t overload electrical circuits with multiple devices such as holiday decorations or space heaters.
• Be alert to potential fire hazards and know the planned exit routes in case of fire.
• Drain hose bibs and turn off outside water spigots.
• Prepare an emergency kit in the event of an extended power outage or severe weather conditions which would necessitate a shelter in place situation.
• Notify the landlord if the tenant plans an extended absence from the rental unit, such as holiday travel.

How a landlord responds to a caller regarding an ad for a rental vacancy or welcomes a visitor to an open house showing can make a difference in the prospect’s interest in moving forward to the application stage. The caller’s or visitor’s answers to a few crucial screening questions can help the landlord determine if there is good indication that the prospect could qualify to the landlord’s rental standards and that an application should be pursued. Both landlord and prospect use the first contact between them to determine mutual interest and qualification.

When a landlord pre-qualifies a prospect, the objective is to determine as quickly as possible in a professional manner whether the prospect is a viable candidate for tenancy with potential as a good long term tenant. Some landlords feel that pre-screening a prospect is an awkward procedure and prefer to let the prospect ask questions. A landlord should keep in mind that filling a vacancy with a qualified tenant is all important to his business. Information gathering, as long as it is done legally and with full knowledge of applicable laws, particularly fair housing laws, is important to selection of a good tenant.  A few questions can be well worth the effort in order to better protect the rental investment by reducing potential risks.

The prospect in turn should have a few questions to ask the potential landlord. The print advertising should have provided basic information about the rental unit – address, number of bedrooms and baths, monthly rental amount, and the required security deposit. Many prospects have already self-qualified themselves by reading the advertised information and assessing whether the rental unit fits their needs. Most prospects will need to physically walk-through the unit before making a preliminary decision to apply. The prospect may question the landlord to determine if the advertised information is true as advertised and to ask what the landlord’s policies and procedures are for tenant qualification, selection, and residency.

Some callers or visitors are interested but not interested enough to move forward to application. Some callers or visitors are genuinely interested but cannot qualify to the landlord’s rental standards. Without a plan in place for pre-screening prospects, a landlord may waste time on those individuals just looking or risk being caught unaware that the interested prospect is a half-step away from a pending eviction.

Pre-screening is the initial qualifier to advance the prospect to the next step of completing an application. An applicant will need to be screened to tenant screening policies, including credit history, rental history, background and criminal history, employment/income source, landlord references, and personal references.

With thorough and adequate screening at each stage of the rental process, a landlord can reduce the potential risk of installing a bad tenant. Prospects that have something to hide can quickly assess the situation and decide to move on. Having clear, written rental standards and uniformly enforcing rental policies is a good business practice.

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

What questions should a landlord ask? Asking questions that help to determine the prospect’s rental situation should provide enough information to determine if there is a match between what the prospect is looking for and the landlord’s property and policies. In all communication with prospects, a landlord should be business-like but friendly enough to encourage the prospect to give consideration to completing an application.

The following questions are some of the most commonly asked questions during the initial contact with a prospect. Other questions may be asked as they pertain to the landlord’s business and rental market.

“When do you plan to move?”

Typically a landlord’s lease agreement requires a minimum of 30 days’ notice of tenant move-out. A response that the prospect wants to move in immediately or within a period less than 30 days could signal a problem for any number of reasons. Moving on short notice could be as a result of employment relocation or family matters but could be as a result of poor planning by the tenant. Responses that suggest the prospect has a pending eviction, past due rents or other lease violations at his current rental should be a red flag notice to the landlord. If the prospect is considering a future move-in date greater than 90 days or is somewhat vague about a future move date, the prospect may not be a serious candidate for tenancy.

“Why are you moving?”

A landlord can learn a lot from the prospect’s response to this question. Typical responses are to get more/less space, be closer to work or school, live in a better neighborhood, a job relocation, family responsibilities, more affordable housing, or to avoid traffic or noise issues. If the prospect gives evasive answers or vague reasons that suggest a problem with his current landlord or neighbors, the landlord may want to more fully explore the prospect’s stated reasons for moving. It is usually a red flag and definitely something to consider if the prospect has a long list of complaints about his current landlord and neighbors. There may be reasons the prospect needs to move.

“Will you have any problems completing the standard application process?

The landlord should explain to interested prospects the landlord’s application and screening process that includes personal interviews, written application, background screenings, and landlord conducted verifications for identity, employment, income-to-rent ratios, rental housing history, and references.

If there is hesitation on the prospect’s part to agree to all or part of customary screenings, there could be any number of possible negative findings when screenings are conducted. If the prospect cannot agree to stated rental policies, the landlord may decline to go forward with the application process.

“Do you have the necessary funds for move-in?”

The landlord should explain the application process including fees due at application submission such as application fee, tenant screening fees, etc. Additionally, the landlord should provide the amount of funds due at lease signing including first and last month’s rents, security deposit, pet deposit if applicable, etc. The prospect should be made aware that possession of the rental unit will not be given unless all applicable fees, deposits, and rents are paid per terms and conditions of the lease agreement. If the prospect counters with alternative arrangements, such as payment installments, the landlord should be prepared to answer according to applicable landlord-tenant statutes for his state, and his previously stated business policies and practices. It may signal a red flag to the landlord if the prospect is not prepared to pay required move-in funds.

“How long do you plan to rent?”

Most landlords are looking for a stable, long-term tenancy, typically a one-year lease agreement. A response that indicates that the prospect will give notice as soon as he buys a house is not favorable to the landlord’s interests. Many landlords do offer month-to-month rentals, shorter-term multi-moonth lease agreements, or are willing to structure a lease to coincide with a school term. A response such as “it depends” may indicate a prospect isn’t committed to a firm decision for moving or has other issues that the prospect is unwilling to share with the landlord.

“How many people will be living in the rental property?”

Landlords set occupancy limits based on regulations and codes set by local building, structural, health, and safety standards as well as limitations set by property size and mechanical/system/utility constraints. A maximum number of occupants for square footage space may be specified by local ordinances. If the number of potential occupants exceeds recommended standards or the prospect indicates an uncertainty regarding the number of occupants (i.e., it varies), it could be a potential red flag for the landlord.

“Can you provide employment references and proof of income?”

A landlord must determine to the best of his ability that the prospect can prove a steady source of income and sufficient income to pay his rent. If a landlord requires an applicant to have a gross monthly income three times the monthly rental amount, a prospect needs to know that upfront. If the prospect is currently out of work but expects to have a job soon, or the prospect has held a number of jobs in relatively short time or appears to change jobs or types of jobs frequently, this could present a problem for qualification as an applicant.

“Can you provide previous landlord references?”

A landlord should require an applicant to provide rental housing history previous to his current landlord. Reference checking with previous landlords is an important part of tenant screening. The landlord will want to find out how well the former tenant paid his rent and generally performed according to the lease agreement.

If a prospect cannot supply satisfactory previous landlord references, it can signal problems. If a prospect asks this current landlord not be contacted, it could be for reasons such as lease violations, past due rents, pending evictions, etc.

It is a good business practice to keep written, dated documentation of all responses to the advertising of a rental vacancy, including the corresponding action that was taken, such as application submitted, prospect declined to apply, or the prospect did not qualify to stated rental standards, and the address/unit number of the advertised vacant rental unit, to help defend against possible claims of discrimination at a future date.

In summary, pre-screening a potential tenant is a risk management measure that saves time and money for a landlord in the overall qualification and selection process of a good tenant.

The rental agreement between landlord and tenant is a legal contract setting out landlord and tenant responsibilities and obligations in the same manner as does a lease agreement for a fixed-term. The landlord is obligated to offer and maintain housing in a safe and sanitary condition under the implied warranty of habitability.

The landlord is obligated to protect the tenant’s rights to quiet enjoyment of the rental premises. The tenant is responsible to keep the rental unit in good condition and to pay rent as set out in the agreement terms and conditions.  The time frame of the tenancy is the difference between the two types of landlord-tenant agreements.

An important issue is to make sure you understand your state’s landlord-tenant statutes regarding rental agreements, particularly notice requirements to change or terminate a month-to-month tenancy. While some states do not have a state statute on the amount of notice required to change rent or other terms, in general the amount of notice that a landlord must give to increase rent or change another term of the rental agreement in a month-to-month tenancy is the same as that required to terminate a month-to-month tenancy. If the rental unit is governed by state and local rent control laws, there may be different notice requirements.

Note that the amount of notice may also depend upon which party, landlord or tenant, gives notice to end the tenancy. There may be different notice requirements if the tenant has violated terms of the rental agreement, e.g. failure to pay rent.

Offering a month-to-month rental agreement can be advantageous for a landlord in certain circumstances depending upon the landlord’s business plan, area market conditions, and tolerance for risk.

A month-to-month tenancy is automatically renewed each month unless the landlord or tenant gives the other party the proper amount of written notice, typically 30 days, to terminate the agreement.

The most frequently mentioned advantage of a month-to-month agreement is the flexibility and control that it offers landlords.  The flexibility of a month-to-month agreement allows a landlord to quickly adjust to market conditions, notably if rents are rising, the landlord does not have to wait until the end of a tenant’s fixed-term lease to increase his rents. In many states the landlord can notify a tenant of an upcoming rent increase with only 30 days’ notice. Terms and conditions of the rental agreement can also be changed for business necessity (subject to any restrictions of local rent control ordinances) as long as the required notice is given to the tenant.

A landlord has the flexibility to set his rents at a higher than market rent to compensate for a perceived higher risk of vacancy in the near future. Tenants who seek month-to-month rentals do so for a reason and the ability of a landlord to provide rentals of this nature can often attract rental prospects to the landlord’s properties. A potential renter may want the benefit of a month-to-month rental for purposes such as a vacation stay, short term housing due to job assignment or family considerations, being new to the area and wanting to become familiar with local housing options, actively looking to purchase a home in the near future, waiting for new home construction to be finished, needing temporary housing until major renovations to their residence have been completed, military temporary duty station, roommates adjusting to co-tenancy living, seasonal work, change in financial situation, or for many other and varied reasons. A tenant with possible changes in his future living arrangements may feel that a month-to-month agreement offers a greater benefit to him by the fact the tenant will not have to break a fixed-term lease when his circumstances change and the tenant must move on.

A landlord has more immediate control of his property if a tenant fails to comply with rental terms and conditions. A landlord can initiate termination of a month-to-month tenancy by giving the required legal notice to end an unsatisfactory landlord-tenant relationship before it becomes a more costly legal action for eviction. The eviction process through the court system for a material violation of a fixed-term lease condition can take months. Control of the situation and the return of possession of the rental unit can be accomplished within a short time if the tenant has a month-to-month agreement.

There are downsides to a month-to-month rental agreement. Most commonly a landlord will hesitate to offer a month-to-month rental agreement because of the perceived risk of constant tenant turnover, although even with a fixed-term lease, a landlord has no guarantee against tenant turnover. Not only can a landlord terminate the rental agreement on fairly short notice, the tenant is also free to terminate his tenancy with adequate notice. The rental unit could be turned over several times a year. A landlord will need to be prepared to handle a vacancy quickly and efficiently once notice by either party is given to terminate the tenancy. The amount of preparation needed to restore the unit to good condition will of course be dependent upon the circumstances.

Some landlords believe that a tenant with a fixed-term lease agreement will take better care of a rental unit than would a tenant with a shorter period rental agreement. However, if the landlord always conducts adequate tenant screenings and selects a qualified tenant each time to fill a vacancy, no matter what the period of the term, the landlord will be better prepared to help protect his property from damage and his current tenants from risks.

Some landlords may assume collecting a security deposit is all the protection a landlord needs against tenant rent default and property damages.

A landlord in developing his security deposit policy will need to determine how much financial protection is really necessary for his business and assess whether a security deposit can actually provide that level of protection. Most likely a landlord will need a comprehensive business risk management policy that includes a security deposit amount adequate to business necessity to fully address potential financial risks.

As review, the purpose of a security deposit is to protect the landlord from damage caused by a tenant. Specifically a landlord may only recover funds from a tenant’s security deposit if the tenant has defaulted on his obligation to pay rent (owes past due rents) and/or the tenant has caused physical damage to the property that is beyond normal wear and tear allowed by statute.

Most states limit the amount of security deposit that may be collected to an amount that is equal to one to two months’ rent. State landlord-tenant statutes may place restrictions upon the use of the security deposit. Most states allow deductions from the security deposit for unpaid rent, damages to the premises except for normal wear and tear, cleaning costs to restore premises to move-in condition, and replacement of missing items removed from the premises by the departing tenant.

All states allow a landlord to collect a security deposit when the tenant moves in and to hold the deposit until the tenant moves out. Security deposits are funds that legally belong to the tenant and remain a credit of the tenant during the tenancy. A landlord is legally accountable to the tenant for use of the security deposit funds.

State landlord-tenant statutes regulate security deposit limits, deadlines for itemization and return of security deposits, and disclosure requirements. The statutes provide clear protections to tenants for the use of their security deposit funds and the return of deposits upon tenant move-out.

Deposit disclosure requirements must usually be in writing. Common disclosures require the landlord to disclose the conditions under which part or all of the security deposit may be withheld and how the deposit is refundable. A landlord may be required to provide a written list of preexisting damage to the rental unit, a copy of inspection orders for the unit, or a list of habitability defects before collecting a security deposit. In most states landlords that require a security deposit must utilize a move-in/move-out property inspection checklist to document the condition of the rental unit at time of tenant move-in and upon tenant move-out.

Not thoroughly understanding the landlord-tenant statutes regarding security deposit requirements for the state where the rental property is located can jeopardize the landlord’s business. Misuse or misunderstanding of security deposit regulations can be a costly mistake for a landlord.

So what are some of the business protections and limitations of a security deposit?

A security deposit as part of the landlord’s rental policies aids in the landlord’s tenant screening and decisioning process. Prospects looking for a new rental can self-qualify themselves for the amount of funds needed at move-in for a particular property. In screening applicants, the landlord will evaluate the applicant’s ability to meet financial obligations including rent, deposits, and allowed fees. A security deposit is considered a significant amount by most renters. A landlord can further discuss with the applicant the importance of meeting lease terms and conditions and how the security deposit collection and return of funds will be handled. The future tenant should understand that the return of his deposit is dependent upon him (tenant) meeting his obligations under lease.

While a landlord usually wants to charge as much as he legally can, market conditions can have a direct impact on the amount he will charge. Generally the larger deposit the tenant has at stake, the more likely the tenant will return the unit in good condition. Without requiring some security commitment from the tenant, the tenant may feel no loyalty or obligation to respect the property and fail to fulfill his responsibilities. The security deposit is often seen as a psychological tool that works to the landlord’s advantage.  Additionally, by collecting a larger deposit, the landlord has greater financial protection if the tenant should leave owing rent. However, if still within allowable statutory limits, the security deposit is set too high many potential applicants who otherwise might qualify to rent under the landlord standards may not apply because of the higher move-in costs.

Security deposits provide financial protection to the landlord for minor tenant damage to the property. A security deposit, usually limited to one or two months’ rent, cannot provide protection for major property damage beyond the deposit amount collected. A security deposit does not protect against tenant normal wear and tear on the rental unit. Major property damage by a tenant that exceeds the amount of the security deposit will be the landlord’s responsibility to repair the damage and restore the rental unit to the legal standard of habitability. The landlord will need to take legal action against the tenant to recover the costs of repair.

Tenant rent defaults can cause major financial problems for a landlord that cannot be fully covered by a security deposit. To remove a tenant from the rental unit will require legal eviction, a process that could take several months.

The matter of security deposits should be a straight-forward rental policy developed from state statute, business necessity, and local market conditions. Too often, setting of security deposit amounts and handling of the deposit are taken for granted. If an important detail in the handling and return of deposit funds is missed or not done in a timely manner, there can be serious financial problems for a landlord including the possibility of legal action by the tenant.

Finding a good tenant is a challenge. Keeping a good tenant is a sign of good business. Tenant turnover is expensive and time consuming. There is no guarantee the replacement tenant will be equal to or better than the outgoing tenant. There is every potential that a new tenant can be a problem tenant once installed. A new tenant can place a drain on landlord resources to orient the new tenant to rental rules and policies. Until the new tenant establishes a good on-time payment history with the landlord, the landlord cannot really count on the tenant’s rent as money in the bank.

Few landlords want the hassle of starting over with a new tenant. Most landlords would prefer to retain the current tenant by renewing the lease, keeping the status quo and simplifying property operations.

The decision to retain a tenant or to allow the lease term to expire is not always an easy landlord decision. Tenants can be equally troubled by stay or go decisions for the rental future. A landlord should start the renewal decisioning process at an appropriate point in the lease term that allows a timely decision and notification to the tenant. The tenant is due consideration of sufficient time to take action as needed for a move-out.

Both landlord and tenant will need to evaluate their current situation and make an informed decision after considering all facts and known risks.

While a tenant may want to renew his lease and thus avoid the cost and hassle of moving, it is the landlord’s decision to renew the lease agreement with the tenant or allow the lease agreement to expire at the end of the lease term. A landlord should be well aware though of the applicable state’s landlord-tenant statutes pertaining to lease renewal terms and conditions. Accordingly, the landlord’s lease agreement terms and conditions should be in accordance with legal requirements. The lease agreement should state end of lease term procedures and whether lease renewal is an option, an automatic lease term and condition, or whether the lease simply expires with no provision for renewal.

Landlord Considerations Regarding Lease Renewal

As a fixed-term lease nears the end of the term, a landlord must consider the best business decision for his rental operations. Should he offer the current tenant a lease renewal or allow the lease agreement to expire at the end of the term? There can be circumstances that make the renewal decision somewhat easier for the landlord, such as whether the tenant has adequately performed to the lease terms and conditions. If a good tenant is described as one who makes timely payment of rent, respects the rights of neighbors, takes good care of rental property, and makes good effort to work with the landlord to resolve issues, then a bad tenant can be described as tenant who does none of the listed above. The lease renewal decision is therefore influenced by the tenant’s behavior during his tenancy.

Should You Renew?

Lease renewal happens most commonly in order to:

• Avoid the time consuming process of finding a new tenant
• Avoid the costs of filling a vacancy
  • Holding costs of a vacant unit including overhead costs of mortgage, utilities, taxes, and insurance
  • Loss of rents due to vacancy
  • Advertising and marketing costs
  • Tenant Screening costs
  • Move-in costs including tenant orientation and property inspection
• Reduce cleaning and unit update costs associated with tenant turnover
• Eliminate the tenant learning curve on rental policies, procedures, and rules
• Strengthen existing landlord-tenant relationship

On the Other Hand

Providing that the lease agreement and state statutes do not address the issue or specify requirements for lease renewals and the landlord decides the better business decision is to let the lease expire at end of term, there is no option for the tenant to extend his tenancy. The decision to not make an offer for lease renewal is most commonly based on:

• A problem tenant
• Suspected illegal activities
• Below market rent with tenant known to be unwilling to pay market value
• Planned major renovations of unit
• Planned sale of the property

Other Landlord Considerations Regarding Lease Renewal

While the option of offering lease renewal to the current tenant could make rental operations a little easier, there are several issues associated with lease renewal that could be overlooked when conducting an analysis and evaluation of a renewal offer.

Property Condition

While the current tenant may have paid rent on time, been a good neighbor, and otherwise adhered to rental rules, a landlord should conduct a property inspection to determine that the rental unit is being properly maintained by the tenant and that tenant housekeeping is at an acceptable standard before offering a lease renewal. Absent tenant complaints or requests for property maintenance and repair, a landlord may not become aware of an issue until a small problem develops into a much bigger problem. The property inspection should be conducted to the move-out inspection standard to determine the current condition of the unit. Specifically, the landlord is inspecting the unit to determine there is no visual sign of tenant-caused damage or unreported maintenance or repair issues. If the tenant has not fulfilled his maintenance responsibilities and the unit is not in good condition, it would be inadvisable of the landlord to renew the lease and allow future potential damage to the property.

Enforcement of Lease Terms and Conditions

When a tenant has been a good tenant and has established a good working relationship with the landlord, a landlord may be tempted to ignore the tenant’s minor lease violations. Selectively enforcing rental rules is tenant discrimination and prohibited by federal, state, and local fair housing laws. It is a best practice to keep landlord-tenant relationships on a professional basis to guard against claims of discrimination. It should be made very clear to a tenant being offered a lease renewal that all applicable laws and lease terms and conditions will be enforced according to requirements. Any tenant expecting a rental concession or that the landlord will allow a lease violation just this one time should be made aware that termination of tenancy may occur as a result of the tenant’s action(s).

Change in Tenant Qualifications

Many fixed term lease agreements are for a term of one year. A tenant who qualified under the landlord’s rental standards a year ago may have had a change in regard to one or more of the landlord’s qualification criteria. Many landlords do requalify a tenant to current standards if the landlord is considering offering the tenant a lease renewal. Some landlords do not. However, it is possible that the tenant has been current with rent in the past year and has had no lease violations, yet a recent job loss, family obligations, or unexpected medical conditions may present difficulty to meet future obligations. A landlord should evaluate his potential financial risk if he chooses not to requalify a tenant for lease renewal. A landlord should be knowledgeable of legal requirements or prohibitions in screening/rescreening a tenant. Some states have specific regulations in the use of tenant screening/background reports for use by landlords. If tenant screening is legally permissible, the results of the screenings could be compared to the tenant’s screening reports at initial application. If the debt structure is significantly greater, a landlord may want to more thoroughly examine other areas of qualifying criteria.

A possibility, although not as likely, is that the tenant hopes the landlord will automatically renew the lease because the tenant knows he will not be able to qualify under another landlord’s rental criteria due to changes in the tenant’s financial condition or as a result of incidents that may be discovered in conducting a background check.

Market Conditions

A lease renewal decision may be influenced by local area market conditions and the market position of the landlord’s property. Starting over with a new tenant may allow for increased rents while a slow market may be more favorable to renewing the current tenant lease.

Conclusion

Lease renewal is controlled by the landlord through his business policies. Landlords must carefully analyze the potential risks of lease renewal along with the known rental history of the current tenant.