Tenant turnover is an inevitable part of property management. However, tenant turnover can consume a large portion of operating expenses which can be problematic for landlords in planning, budgeting, and managing the bottom line. Frequent tenant turnover can disrupt other tenants in the rental community which could cause problems in the landlord-tenant relationships.

When a tenant vacates the property with clear intention to terminate the lease, or is removed from the property by court order, the landlord must take steps to prepare the property for a new tenant. Tenant turnover can happen with or without proper notice to the landlord. A landlord needs a plan of action to ease the transition of tenants, in and out, to help minimize tenant turnover costs during this period.

For planning and budgeting purposes, it is helpful for a landlord to determine his turnover rate. Turnover rate is the percentage of renters that move out of a property at the end of each contract period. To calculate the turnover rate, a landlord would divide the number of tenants that move out in a 12-month period over the total number of tenants that moved in during a 12-month period and then multiply by 100.This rate represents how many tenants may be expected to move out each year based on the number of tenants currently in residence. The tenant turnover rate is helpful to understand how tenant turnover affects the business, and what steps could be taken to reduce turnover costs and improve property management.

Turnover costs include more than just lost rents from a vacancy. Lost rent from an extended vacancy can be a serious setback for some landlords. There are associated expenses that must be paid regardless of the vacancy. Costs can vary depending on financial obligations, operating costs, property location, property condition, age of the property, and local market supply and demand.

When developing a plan to address tenant turnover, a landlord should include an analysis of his average tenant turnover rate, calculate how much a turnover costs his business, and budget accordingly for turnover costs.

Tenant turnover happens for various reasons. While some instances of turnover are predictable, others are not. Tenant turnover occurs after:

• Expiration of lease agreement: Typically tenants have an option for lease renewal at the end of contracted term. If tenants decline to renew the lease, the landlord must proceed with his tenant move-out process. A tenant vacating the property begins the tenant turnover process.
• Early Termination of the lease: The tenant may break his lease by leaving the property early. At the tenant’s departure, the landlord will begin the process to turn over the property.
• Eviction: Eviction is a court ordered process to remove the tenant from the property as a result of a material violation of lease terms. The landlord regains possession of the property and begins the process of tenant turnover.

Tenants may choose to relocate for any number of reasons, such as:

• Dissatisfaction with the unit, the property, property management, or neighboring tenants
• Financial changes
• Privacy and security concerns
• Space requirements
• Life events, e.g.; job relocation, family matters, marriage, divorce, death

Tenant turnover costs can vary whether the properties are self-managed by the landlord or by a property management company. The turnover process creates administrative work with associated costs of time and labor by the landlord and his staff. The process can include hidden costs for finding a new tenant such as marketing and advertising, responding to inquiries, showing of property, application processing, tenant screenings, tenant selection, lease signing and new tenant onboarding as well as costs associated with the outgoing tenant for inspections, cleaning, repairs, deposit accounting, and possible legal fees and court costs for evictions.

Frequent tenant turnover can negatively affect the landlord’s brand and reputation. Potential renters check online reviews and rank properties by desirability, location, rent, amenities, and rental policies. If it appears that the property has constant turnover, the potential renter may focus his rental search on other properties.

Frequent tenant turnover may also create a potential concern for future buyers of the investment property. A potential buyer may wonder what is wrong with the property if there is frequent tenant turnover and  factor that frequent turnover into negotiating a lower sales price.

There are practices that can help in reducing tenant turnovers. Tenant screening is a primary factor in qualifying and selection of quality tenants who are looking for a long term rental relationship. These tenants can help keep the property in good condition, meet their rent obligations, and generally are looking for like-minded neighboring tenants. Providing a longer term lease agreement or offering satisfactory renewal terms at conventional lease termination will help reduce the landlord’s operating costs.

The lease agreement provides the contractual terms and conditions for landlord and tenant. The lease should be clear in detailing rental policies and practices for tenancy. This includes rental fees, security deposit handling and return, landlord rules and regulations, rents, definition of material defaults, property damage, legal remedies for lease default including filing of eviction and tenant responsibilities for keeping rental property in good condition. The landlord’s move-out procedures should be clearly communicated to the tenant during orientation to ensure that the tenant fully understands his responsibilities at lease termination.

A positive landlord-tenant relationship helps to build tenant trust and confidence in the landlord’s property management. This can be an influencing factor in the tenant’s decision to renew or to relocate at lease termination .Maintaining open communication with tenants throughout the tenancy  should be a priority business practice. Landlord attention to customer service matters, prompt response to repair and maintenance requests are also factors in renewal decisions.

Being responsive to receive feedback from tenants is important to improving customer services and overall property management. Tenants appreciate a landlord willing to listen and respond in a prompt manner to their concerns, likes, and dislikes. Conducting an exit survey at lease termination can provide valuable feedback to the landlord on a variety of rental policies and practices.

Tenant retention will reduce turnover operating costs. Many renters would prefer to renew their lease to stay in place and avoid the costs and stress of moving. By development of tenant turnover policies and practices, a landlord can understand his true costs of turnover and find ways to manage his processes in a more effective manner. A best business practice is to invest time and energy into positive landlord-tenant relationships to retain quality tenants to minimize frequent tenant turnover and reduce operating costs.

Choosing a tenant screening company has significant impact on business operations. The screening company’s professionalism, business experience, references, products, pricing, delivery, and legal compliances must be evaluated to determine if the business relationship will provide the service the landlord requires for his business needs and his legal compliances.

A landlord must be confident in this tenant screening partnership to ensure receipt of accurate applicant consumer data required for qualification of an applicant to the landlord’s rental standards and potential offer of tenancy.

There are Fair Credit Reporting Act (FCRA) requirements and procedures for tenant screening providers. Tenant background checks are considered consumer reports under the FCRA if they are used to help decide eligibility for housing and include information that has bearing on a consumer creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Landlords and tenant screening companies are subject to FCRA compliance. The provider is required to follow reasonable procedures to ensure accuracy, require certifications from their clients, and provide clients with information about the FCRA.

Landlord due diligence in evaluating and selecting his tenant screening company is a core business function. There are known issues with incorrect or incomplete posting of public records information in many jurisdictions which can result in erroneous information on tenant background checks. Without accurate, complete, and timely consumer information, the landlord is at risk of installing an unqualified tenant with potential rent default and property damage. The information returned by the screening provider is only as good as the provider’s quality assurance of compliant policies and procedures in compiling tenant background checks. While the screening company furnishes the consumer reports, the final decision for acceptance or rejection of the applicant is the landlord’s decision.

It may be beneficial for a landlord to prepare a checklist of the important criteria to evaluate potential tenant screening companies. The checklist can be used to analyze the products, pricing, and screening process that each company uses to provide tenant screening reports.

The following list is representative of important considerations that could be used in evaluating a screening provider’s qualifications.

• Knowledge of applicable current federal, state, and laws regarding the use of tenant screenings for the jurisdiction of the rental property location. Some states and cities regulate the use of credit reports and criminal background checks for tenant screenings. A landlord should confirm the company’s policies and procedures for review and update of legislative actions to ensure current compliances.
• FCRA compliant. A landlord should inquire how the company operates under FCRA requirements. An important question to ask the provider is how the adverse action process is handled. An adverse action notice is required by FCRA if the landlord chooses not to rent to an applicant based upon the content of a background check.
• Quality assurance that report data is accurate, verifiable and current. Providers should be able to furnish information regarding how their system matches rental applicant records to corresponding data with appropriate filters in place to identify and remove duplicative data and minimize errors of false reporting. Providers should be able to provide information on what databases are used for public records and how often the database information is refreshed.
• Utilize current technology measures to ensure data security and safeguarding of sensitive information to prevent data theft, and data fraud. What are the quality control procedures?
• Offer a wide range of screening products, e.g., credit reports and background reports. If the product line is too specialized, a landlord would need to have multiple screening providers to obtain all necessary screenings for his applicant. Having to interface with multiple providers and different collection and delivery methods can present challenges in analysis and evaluation of reports or the reports could contain conflicting or confusing information requiring further investigation and verification. Make sure the company can provide the types of reports needed for applicant screening before committing to a service agreement.
• Transparent in their product pricing and customization options. Providers should post clear understandable pricing structures to define price points for affordability and flexibility for landlord productivity and cost efficiencies. A la carte pricing can be attractive to landlords that need only basic services. Package pricing of the most utilized screenings can offer a more comprehensive screening report yet at a lesser cost than purchasing several products separately. A landlord should ask about the billing process, e.g., does the landlord or applicant pay screening costs.
• User friendly in their process for data entry on multiple platforms. The screening company should have an easy and simple online ordering process for  tenant screening reports. If the order process is difficult to understand or to use, a landlord will hesitate to use the service or possibly avoid screening altogether. This is detrimental to the landlord’s business operations.
• Provide clear, understandable information for products, pricing, and process. Instructions should be provided for guidance on data entry, data retrieval or delivery of processed data. Frequently asked questions should be posted on the website and direct access to trained service staff for help with problems with reports, billing questions, or other assistance should be readily available. If the screening process is cumbersome or difficult to understand and complete, a landlord should consider another provider. A landlord should request a copy of sample reports as a preview of what the landlord could expect if he engages the services of the provider.
• Process orders in a timely manner. Delays in processing or long intervals before reports are returned can cause a landlord to lose a good prospective tenant. Time is of the essence in screening and selection to fill a vacancy.
• Customer service focus. Customer support is all important to a busy landlord. A major complaint against screening providers is not being able to reach a representative to ask questions or resolve a problem. Real, live personal contact with a trained friendly customer service rep is valuable in itself and is a primary consideration in selecting a provider. If the provider offers flexible hours of customer service, the greater the chance that the provider will get the landlord’s business. Applicants do not just apply during regular business hours. Landlords want a provider that can help them qualify an applicant nights, weekends, or holidays. Client reviews and ratings may provide insight on real time response to landlord questions and help in resolving problems.
• Provide a sample service agreement for landlord review and discussion. Contract language should be clear, understandable, detailing agreement terms, conditions, and default remedies, including pricing, policies, and services provided.

It is a landlord’s responsibility to operate his business in compliance with applicable federal, state, and local laws. In choosing a tenant screening company, a landlord must ensure that the provider operates in a likewise compliant manner that respects the rights of consumers to privacy and security of personal identifying information. Which service company is best for a landlord’s rental operations requires landlord analysis and evaluation of critical elements in the decision making process and how best the screening company fulfills this business necessity.

Winter vacancies can be challenging to fill. Low market demand, cold weather conditions, and holiday activities can influence how quickly a winter vacancy can be filled. Landlords can use a variety of strategies to attract prospective renters and move them forward to application and qualification. It is important that the goal is not to just “fill a vacancy” but to fill the vacancy with an applicant qualified to the rental standards.

People always need a place to live no matter the season. While a person may not want to move during the winter season, a change in personal circumstances; e.g., marriage, divorce, children, job related reasons, or simply needing more or less space, can be the decisioning factor to move. Prospective renters will prioritize their efforts to identify and evaluate potential rental properties according to their need and timeframe. Landlords wishing to fill a seasonal vacancy must actively market their rental properties across multiple channels to reach as many rental prospects as possible.

Landlords should develop rental policies keeping in mind the seasonal nature of real estate. There are peak periods of high interest in searching for rentals and correspondingly peak periods of moving into selected units. Understanding the market conditions of the local area, a landlord can direct his marketing efforts to focus on priorities and demographics of the area he serves.

Current market data combined with historical data provide guidance for vacancy policies and practices. It is critical that a landlord know the position of his properties in the local market. The business plan should be developed to maximize income opportunities during peak season and slow markets. Within that business plan the amount of business risk a landlord is willing to assume will give direction on how much flexibility the landlord has in business operations. Flexibility is a key part of filling vacancies during winter/slow season markets. If a landlord is willing to consider flexible lease terms and/or incentives, he may find that a December or January move-in can be a good decision for qualified renters and his business. By being flexible, the landlord may avoid having a vacant unit during the winter months.

The advantage of being knowledgeable of local market conditions helps in the landlord’s marketing efforts. Most landlords know what works for them for their properties. It is better to concentrate efforts on those listing sites or social media postings that have been successful before in producing qualified leads. Time is short and trying to appeal to everyone on all possible sites may not be productive and will certainly expend more time and energy in contacts and follow-ups. Better to devote time and energy in polishing the listing description to attract interest in the vacancy.

The best way to handle winter/offseason vacancies would be to avoid having leases expire during the winter months. A landlord can reasonably control this practice by the way his lease agreements are drawn by staggering lease expirations to occur within the peak season . This practice avoids a vacancy in slow winter months. For example a tenant moving in the month of December could be offered a 15-month lease to expire during the beginning of the peak season rather than a 12-month lease. If the landlord offered a standard 12-month lease, the landlord would have to deal with marketing the vacant unit once again during a December slowdown.

There is a practice that would give the landlord advance notice in scheduling the move-out and the preparation of a vacated unit. For example, many fixed term lease agreements require the tenant give 30 days’ Notice of Intent to Vacate the rental property. As long as there are no statutory restrictions to the contrary, a longer notice period such as a 60 day notice requirement gives the landlord more time to prepare for the upcoming vacancy including scheduling an inspection of the premise to determine how much prep work will be needed to return the unit to market condition. Time is money and reducing the time the unit is off the market allows quicker turnaround to install an incoming producing tenant.

A landlord may want to consider offering a short term renewal to a tenant whose lease expires during the winter months. Rather than having to search for a new rental and move during the winter months, the tenant may be agreeable to a few months extension of the lease. A short term lease may benefit both landlord and tenant in this situation. Ideally the length of the short term lease would carry the tenant into the peak season. Should the tenant’s plans change at that point and the tenant wishes to renew the lease for the standard term of 12 months, the landlord has avoided a future vacancy during the winter season.

A landlord could consider offering a month-to-month rental agreement to keep the unit occupied during cold weather months. .A landlord would need to research landlord-tenant statutes for month-to-month rental agreements for his property locations. Generally, a month-to-month agreement can be terminated with a 30-day notice to vacate. In some situations this could bring a termination date closer to peak season. While a vacancy would not be entirely avoided, a delayed move-out could be of benefit to the landlord. Screening and qualification should of course be conducted for any length lease term.

Because of the timing of a winter vacancy there is some urgency to move quickly to fill the vacancy. A landlord may wish to review his rental processes to determine if there are more efficient ways to expedite the filling vacancy process. While the winter season may be slower for demand, it does not mean there is less competition for a vacancy. The prospect has made a deliberate choice to search for a new home and has likely expressed interest in more than one property. An interested prospect evaluates landlord response as well as property amenities in their search for a new rental. A simplified process that makes it easy on the prospect to apply, qualify, and move-in is more likely to result in tenancy. The focus of the review should be on ways to streamline processes with greater efficiencies, technology, and service.

The landlord’s ability to be flexible with the length of the lease term and remaining open to offering winter incentives can be quite attractive to renters. For example a landlord could choose to offer an incentive to move-in during the months of December and January. By discounting rent for those two months, an incoming tenant saves money, the unit is occupied, and may be the tenant’s decisioning factor over a competitor’s rental. The lease agreement should clearly state in understandable terms how the incentive can be used – i.e., tenant agrees to 12-month lease agreement, rent incentive is applicable to the first two months of the lease, there is a penalty for early termination of the lease, offer is contingent upon applicant qualifying to rental standards. Using the example of a unit rent of $1100 per month, the incentive to move in now would discount December and January rent to $1000 per month with the remaining 10 months’ rent at $1100 per month.

It could be a modest investment on the landlord’s part to offer a rent incentive but by doing so a rent incentive could bring more interested prospects and qualified applicants to selecting the vacant unit. When screening applicants for this incentive arrangement, landlords should be sure to qualify applicants to full financial rent obligations; as in the example, 12 months’ rent at $1100 per month.

A landlord should also consider his ability and willingness to handle vacancies during the winter season. While it could be a slow market in his local area, the landlord himself may have many other commitments on his time and energy to adequately market and service the vacancy. A landlord may give thought to outsourcing rental management to a property management company. Professional property management is available to a landlord as an option at any time. Whether self-management or professional management of his rental properties, it is the landlord’s decision to determine the best solution for his business needs, his properties, and his market.

The Fair Housing Act (FHA) prohibits discrimination in the sale, rental, or financing of dwellings and in other housing related transactions because of race, color, national origin, religion, sex, familial status and disability.

National origin discrimination is illegal under the FHA.

National origin discrimination is treating someone differently in housing related transactions because of the person’s ancestry, ethnicity, birthplace, culture, and language. National origin means the geographic area in which a person was born or from which his ancestors came. The geographic area can be a region within a country or a region that spans multiple countries. National origin discrimination can occur even if a landlord does not know a person’s particular national origin or is mistaken about a person’s national origin.

If a landlord treats someone differently because he or she speaks with an accent or speaks a language other than English, it may constitute national origin discrimination.

Prospective tenants cannot be denied housing opportunities because they or their family are or appear to be from another country or certain ethnic background; because they have a name or accent associated with a national origin group; because they participate in certain customs associated with a national origin group; or because they are married to or associate with people of a certain nation origin.

Discrimination based on national origin can take many forms. A landlord may:

• Advertise a preference, bias, or limitation based on national origin,

• Refuse to accept or deny applications from persons whose primary language is other than English or who speak English with an accent,
• Steer or restrict persons to designated areas of the rental complex or to certain rental units because of national origin,
• Falsely claim there are no available units when potential applicants appear to be from another country,
• Use linguistic profiling to set less favorable terms and conditions for applicants because of national origin,
• Set different rents based upon national origin,
• Require higher security deposit or other fees based on national origin, or
• Require additional identification documents from a person based on their national origin.

Discriminatory rental policies or house rules during tenancy may also violate the FHA. It is discrimination if a landlord selectively enforces policies and practices that unfairly target tenants because of their national origin. An example would be failing to provide the same level of services and amenities to certain tenants due to national origin or by limiting or delaying maintenance and repairs to tenants based on their national origin.

Limited English Proficiency (LEP)

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

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

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

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

While the guidance notes that a person’s inability to read, write, or speak in English could be associated with a disability, in such circumstances, other statutory protections would apply, such as the landlord’s obligation to provide reasonable accommodations.

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

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

Fair Housing and Immigration Status

The U.S. Department of Housing and Urban Development (HUD) has published guidance regarding the Fair Housing Act and immigration status.

Every person in the United States is protected by the Fair Housing Act. A person’s immigration status does not affect their federal fair housing rights or responsibilities. National origin discrimination is illegal regardless of the victim’s immigration status.

The Fair Housing Act applies even if local ordinance or state law fair housing protections exist.

California law specifically addresses the issue of immigration status by prohibiting landlords from inquiring about immigration status. California law prohibits a “landlord or any agent of the landlord” from inquiring about the immigration or citizenship status (or compelling a statement about immigration or citizenship status) of a “tenant, prospective tenant, occupant, or prospective occupant of residential rental property.”

New York City Code prohibits discrimination in housing against persons of actual or perceived immigration status or national origin Persons have rights regardless of immigration status including:

• It is illegal for landlords or other housing providers to refuse to sell, rent, or lease housing—or to do so with different terms, conditions, or privileges—because of someone’s immigration status or national origin.
• It is illegal for landlords or other housing providers to harass tenants because of a tenant’s immigration status or national origin.
• It is illegal for landlords or other housing providers to refuse to do repairs or to provide substandard housing conditions because of a tenant’s immigration status or national origin.

Fair Housing Act Protection of Rights

It is illegal to coerce, intimidate, threaten, or interfere with a person’s exercise or enjoyment of right granted or protected by the Fair Housing Act. This includes threats to report a person to U.S. Immigration and Customs Enforcement (ICE) if the person reports housing discrimination to HUD. HUD does not ask about immigration status when investigating claims of housing discrimination.

Immigration Documents

HUD guidance addresses the question of whether landlords can ask for immigration documents. Landlords are allowed to request documentation and conduct inquiries to determine whether a potential renter meets the criteria for rental, so long as this same procedures is applied to all potential renters. Landlords can request identity documents and conduct credit screening to ensure the potential renter’s ability to pay rent. However a person’s ability to pay rent or qualify as a tenant is not necessarily connected to his immigration status.

Procedures to screen potential renters and existing tenants for immigration status may violate the Fair Housing Act prohibitions on national origin discrimination. Housing complaints alleging landlord inquiries into immigration status will be investigated by HUD to determine if national origin discrimination may have occurred.

Rental policies must be consistent. If information is requested from one person, the same information must be requested from all applicants and tenants. Potential renters and tenants cannot be treated differently because of national origin.

Identification Documents

Landlords should be aware that requiring all applicants to furnish their Social Security number may disproportionately exclude prospective tenants because of national origin. While a Social Security number has traditionally been requested to conduct credit and background screening, there are alternate methods to verify identity and conduct tenant screenings. An Individual Taxpayer Number (ITIN) or other verification method in lieu of a social security number could be used for tenant screenings.

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security number (SSN. They are issued regardless of immigration status.

Additional Information

This article is for discussion only. Landlords are advised to conduct due diligence regarding national origin protections under the Fair Housing Act and seek appropriate legal counsel as required.

For additional discussions regarding a wide variety of real estate investing and management issues see our eCourses and our Mini Training Guides.

Natural disasters are large-scale geological or meteorological events that have the potential to cause loss of life or property. Hurricanes, wildfires, floods, and tornadoes are the most commonly experienced natural disasters.

The best rental practice for landlords in planning and preparation for potential damage to rental property is to be knowledgeable of applicable state statutes regarding natural disaster issues and incorporate those provisions within the lease agreement. Landlord should take a proactive approach to planning and preparation by researching the type of natural disasters that occur in their regional area and take appropriate measures to mitigate damage and loss.

For general safety and protection during weather emergencies, landlords and tenants should take precautions such as:

• Staying informed through local news and weather apps for the latest weather conditions, alerts, and warnings. Be prepared to evacuate as necessary.
• Keeping cell phones charged in case the power goes out.
• Creating an emergency plan including evacuation routes and household communication protocols.
• Making an emergency plan on what to do with pets if evacuation is required. Research nearest emergency shelters that will accept pets.
• Creating an emergency kit with supplies that may be needed for an extended period of time without power. The emergency kit can be used to shelter in place or function as a go bag if evacuation to an emergency shelter becomes necessary.

Lease Clauses

The following sample lease clauses addressing property damage and destruction, and as allowed by statute, may be of help to provide clarity for casualty issues. Landlords may want Landlords should discuss with tenants the rental policies that cover responsibilities of landlord and tenant in the event of a natural disaster. Habitability issues will be of concern for tenants wondering where they are going to live if their unit is damaged, when repairs will be done, and, for most tenants, their rent responsibility if the unit is damaged as a result of the disaster.

The lease agreement is the governing document for the rental term. In the aftermath of damage as a result of natural disaster, 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 for tenants returning to the property. Of particular concern to tenants is what happens when (1) when a rental unit has been destroyed and is not habitable and (2) a rental unit has been damaged but is still habitable.

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 terminate the lease agreement and formally release the tenant from his contract obligations using a legal document. A landlord should research state statutes and seek legal counsel to determine the best course of action for this termination issue.

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. Landlords may want to consider incorporating the following lease clauses 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 personal 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.
• 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).

Rent

If the rental unit is not habitable, a landlord cannot collect rent per the lease terms. When the lease agreement has been legally terminated and the tenant has surrendered the rental premises, the tenant’s obligation for rent is ended.

Security Deposit

The issue of the tenant’s security deposit must be addressed in the lease agreement regarding lease termination due to habitability issues. The landlord cannot use the tenant’s security deposit for any damages that directly resulted from the natural disaster.

If the rental unit is damaged but still habitable and the tenant continues to live in the unit, the security deposit remains with the landlord until the end of the lease term.

Insurance Coverages

There are some important tasks for both landlords and tenants to perform in order to proactively manage risk from natural disasters. They include routinely checking insurance coverages and updating an inventory of real property and personal property assets. Not only is adequate insurance coverage needed for protection of property and assets, but a current inventory of assets can also help determine the full amount of insurance coverage that is needed and support claims of losses.

For landlords, adequate property insurance is a major property protection measure against risks. Identifying potential risks or determining under-insured areas are issues that can be addressed thorough insurance coverage review and strengthened with changes in coverage or additional policies. Insurance must be in place to be effective. It is too late to adjust coverage once an event is in progress. General insurance policies usually do not cover damage caused by hurricanes or flooding. Special policies for hurricane and flood insurance are needed for full coverage against weather disasters.

For tenants, renter insurance should have been purchased for personal property coverage against potential risks and/or as part of the landlord’s required terms and conditions as allowed by law. A tenant’s personal belongings are not generally covered by the landlord’s insurance.The tenant should review his renters insurance to determine coverages and exclusions. If there is no insurance in place the tenant will bear the costs for loss of possessions and could potentially incur liability for harm or damages to others caused by the tenant’s actions or inactions.

Important Documents

The Federal Emergency Management Agency (FEMA) recommends that important documents such as copies of personal identification, insurance policies, bank account records, other financial documents, and any other type of document that could prove identity, ownership of assets, or restore account records lost or damaged by a weather event be kept in a waterproof container readily available to the individual. Original documents should always be safeguarded in a secured device preferably at an off-premises location or stored digitally through a trusted electronic service. It may be advisable to consider cash as important as certain documents to facilitate recovery after an event.

It is important for landlords to be prepared to the extent of being over-prepared in order to protect tenant safety and mitigate damage to real and personal property. During and after the natural disaster there are many questions and concerns which if not addressed correctly could make the situation worse. Planning, preparation, and protocols provide general information and support to work through the repair and restoration process.

There are many online resources available from a variety of government and public service agencies including the American Red Cross, Federal Emergency Management Agency (FEMA), and Ready.gov, the website for the U.S. Department of Homeland Security as well as from private companies that can provide information on planning and preparation for weather emergencies.

Reusable tenant screening reports are prepared by a consumer reporting agency at the direction of and paid for by the prospective tenant and made available directly to a prospective landlord at no charge by the consumer reporting agency. A reusable report generally contains: (a) a consumer credit report prepared by one of the national credit bureaus within the past thirty days; (b) a report containing the prospective tenant’s criminal history; (c) a report containing the prospective tenant’s eviction history; and (d) an employment verification.

In many rental markets rental housing supply is limited while rents continue to rise. Applicants may need to submit applications to multiple landlords in order to secure rental housing. This creates a financial burden on many applicants as the application fees can range from $20 to $75 for each property application. If applicants did not have to pay a separate application fee for each property, but instead could re-use a current tenant screening report (dated within 30 days), the applicant could recognize significant cost savings in his rental search.

Legislative actions have been taken by some states to help reduce tenant financial costs of application and screening fees by allowing applicants to provide landlords with access to reusable screening reports. Statute provisions and requirements for reusable reports may differ by jurisdiction. A landlord is responsible for conducting due diligence for legal compliances in the appropriate jurisdiction for his properties.

States that have legislation addressing reusable screening reports include California, Washington, Maryland, Wisconsin, and New York.

California

California recently passed Assembly Bill 2559 which standardizes reusable tenant screening reports in efforts to lower rental application costs. The bill which takes effect January 1, 2023 allows applicants to purchase reusable credit reports and provide access to the applicant’s credit report to multiple landlords over a thirty day period. A landlord cannot charge the applicant an application fee if the landlord accepts the applicant provided report. A landlord can however require the applicant to pay a fee for a separate background check if that is the landlord’s standard screening practice.

The new law makes landlord acceptance of reusable reports voluntary. The landlord retains his right to require applicants to follow the landlord’s practice of obtaining tenant screening reports from the landlord’s selected screening provider.

The California bill defines the term “reusable tenant screening report” to mean:

• a consumer report that was prepared within the previous 30 days by a consumer reporting agency at the request and expense of an applicant,
• a consumer report that is made directly available to the landlord for use in the rental application process or is provided through a third-party website that regularly engages in the business of providing reusable tenant screening reports that are available to landlords and complies with all state and federal laws pertaining to use and disclosure of information contained in a consumer report by a consumer reporting agency, and
• a consumer report that is available to the landlord at no cost to access or use.

A reusable tenant screening report is required to include specified information, including the results of an eviction history check.

Washington

In Washington, a comprehensive reusable tenant screening report must contain:

• a credit report,
• a criminal history check in all jurisdictions indicated as prior residence over the past 7 years,
• an eviction history over the previous 7 years,
• income and employment verification, and
• current address and rental history.

The comprehensive screening report is valid for 30 days. After that time the applicant will need to request a new report.

The landlord must provide written disclosure about the screening process to an applicant before the applicant submits an application or pays a screening fee. The notice must include:

• the type of information that will be used to conduct tenant screening (e.g., credit report, background check, eviction history, public records),
• criteria that could cause the application to be rejected,
• contact information of the consumer reporting agency (if the landlord is using a third-party screening company), and
• whether or not the landlord will accept a “comprehensive reusable tenant screening report.”

A landlord who does not provide written notice of the screening process cannot charge an application fee. Additionally the landlord may be liable to pay the applicant a specified fee for failing to comply with statute requirements.

The statute requires landlords to notify applicants whether the landlord accepts comprehensive reusable tenant screening reports. Notification can include:

• a notification statement on the rental listing,
• a notice on the landlord’s website homepage,
• on the rental application page,
• any other calculated manner to notify the renter.

If a landlord accepts reusable reports, the applicant cannot be charged for application fees, fees to accept the report, and fees for additional background checks. However, the landlord can charge the applicant for additional screening if the report is not comprehensive or valid.

A landlord may require a prospective renter to certify the reusable tenant screening report. This is to ensure that there have not been any changes to the applicant’s name, address, bankruptcy status, criminal history, or eviction history in an attempt to hide unfavorable information about the applicant. Certification of the report allows the landlord to use the certification document in any legal proceeding in the event of discovery of altered information.

Maryland

A landlord is required to notify a prospective tenant regarding whether or not the landlord accepts reusable tenant screening reports, either in writing or by posting notice in a conspicuous manner on the rental listing, the landlord’s website homepage, the rental application, or other type of notification method.

Maryland law requires a reusable tenant screening report to contain the following:

• a credit report;
• for each jurisdiction indicated as a prior residence of the prospective tenant, regardless of whether the residence is reported by the prospective tenant or by the consumer reporting agency preparing a consumer report:
• a comprehensive criminal history records check for all federal, state, and local charges against and convictions of the prospective tenant over the previous seven years; and
• a comprehensive eviction history for all state and local jurisdictions for the previous seven years;
• verification of employment and income; and
• current address and rental history.

If a landlord accepts a reusable tenant screening report, the landlord is prohibited from charging the prospective tenant a fee for the landlord to access the report or an application fee. In addition, a landlord may require a prospective tenant to certify that there has not been a material change to the applicant’s information since the date that the report was generated.

Wisconsin

Wisconsin Administrative Code requires a landlord to inform prospective tenants of application fees before the landlord can obtain their credit reports. If an applicant can provide the landlord with a consumer credit report that is less than 30 days old, the landlord cannot charge an application fee.

New York

Landlords are required by law to waive application fees if the applicant can provide a copy of a background check or credit check conducted in the past thirty days.

Considerations

As of this writing a landlord can choose to accept an applicant’s reusable tenant screening report per state statute and legal compliances such as written notifications are followed. The choice may be dependent upon several business factors, such as market area, market conditions, demographics, and number, size, and type of properties.

Conventional tenant screening practices provide a standardized consistent methodology to qualify applicants to rental standards. Screening practices that accept a reusable report from applicants should also be standardized and consistent in methodology and application. Accepting a reusable screening report from one applicant but not another applicant could lead to charges of discrimination. A landlord should follow a written standard of screening with all applicable disclosures of practices for all applicant screenings.

Care should be taken to ensure that the reusable screening report provides all screenings the landlord deems necessary to conduct his business. “Comprehensive screenings” may differ by state statute and it could be necessary for the landlord to conduct additional screenings to fulfill his rental requirements. Permission and fees for additional screenings must follow legal requirements by statute. Screening reports should only be accepted from a consumer reporting agency or a legally compliant third party screening vendor authorized to provide screening services.

The number of fraudulent rental applications has increased over the past few years. The increase has been attributed to several factors within the rental housing industry. Rents have risen faster than household incomes creating affordability issues and rental housing supply and demand in current markets has limited housing choices. Factors such as these can put pressure on applicants to lie about their financial ability in order to qualify to rental standards.

Application fraud is deliberate, purposeful misrepresentation of information as a means to manipulate a rental outcome such as tenant screening and selection. Application fraud is not a case of an applicant forgetting a detail or making an innocent mistake, the applicant intentionally lies on the application no matter how small a detail.

Rental processes have transitioned to a more digital presence making it convenient to conduct business online. The use of online rental applications can create opportunities for fraud. An online application provides a level of anonymity that is problematic for a landlord since the landlord has no knowledge of how the application was completed and by whom. An applicant who might not have considered intentionally altering his personal and financial information in the presence of the landlord may be tempted to alter his information through online application and submission.

Risk assessment research of application fraud shows that as many as one in three applications contain some fraudulent information. Even if that risk factor is adjusted to an average of one in five, the risk can be too high for some independent rental housing providers. Even if the risk can be acceptable to some landlords, the fact that the applicant has intentionally committed fraud may be indicative of a troublesome tenancy and potential financial loss.

The reality is that application fraud is a known risk factor for landlords and property managers. Risk mitigation procedures should be incorporated into rental policies and practices to prevent fraudulent acts by applicants and tenants. Surveys of property managers have documented that most managers have experienced application fraud at some point during their property operations. Unfortunately for some managers the discovery happens after the applicant has become a tenant and the situation then requires legal action to regain possession of the unit and file a judgment for lost rents and damages. The success of the legal action may be harmed by the fraudulent information given by the applicant.

Application fraud can be easy to commit and hard to detect. Without sound business policies and practices enforced to safeguard business operations and to protect current residents, the landlord can incur business liability and financial damage. Risk mitigation of application fraud relies upon recognizing fraudulent applications backed by comprehensive tenant screenings to protect against fraud.

Accordingly, landlords must increase their due diligence efforts, strengthen their tenant screening practices, and keep vigilant against tenant fraudulent acts. Complete tenant screening should be conducted for every applicant. Screenings should include identity verifications, credit report, background check, rental history, eviction history, and references to protect against rental fraud. Utilizing a documented system of checks and balances to verify tenant information allows early discovery of potential fraud. Discovering fraud after a tenant has skipped a rent payment is too late to prevent loss.

A landlord must be alert to discrepancies, omissions or inconsistencies in information in the application itself, as discovered during applicant interviews, background checks, or revealed in reference verifications. Any document used in support of a rental application should be independently verified at the appropriate source or level of agency that purportedly issued the document.

The timing of the investigation and verification process is critical to identify fraud before advancing the applicant to consideration for tenancy. Once a tenant is installed, a landlord must use the legal system to remove the tenant from the property, which may take several months and at great expense.

Application fraud is generally of two types to either inflate or adjust income to qualify to the landlord’s rental standards or to hide an applicant’s negative information on their credit report, background check, a history of eviction, or other evidence of unsatisfactory rental behaviors, such as property damage, skips, and pending legal actions.

Inflating income can be accomplished by altering financial documents to support the landlord’s income requirement. By inflating their income, applicants appear to be qualified for a rental unit that otherwise they could not qualify for. Many type of documents used for financial verification can easily be edited to add or delete information as needed to intentionally commit fraud. As examples, pay stubs and bank statements can be altered to show adjusted income sufficient for qualification. Financial documents can be altered to show name changes, current and past addresses, or other personally identifying information.

Identity theft and manufactured identity documents are used to conceal true identity in committing rental fraud. Identity fraud prevents discovery of true credit history, previous rental addresses, criminal background, bankruptcy, judgments and liens. Identity verification is a critical screening practice to prevent this fraud. A landlord should require the physical presence of the applicant to check identity against a government issued photo identification document or a similar identification process using an online application tool.

Types of Identity Application Fraud

Individual (First Party) Fraud

First-party fraud is when the individual committing the fraud uses their own identity to commit fraud. The individual is not misrepresenting his identity but is intentionally being deceptive about his qualifications, such as using altered financial documents or fake documents for application submission.

True Identity (Third-Party) Fraud

True identity fraud is fraud which occurs when an individual’s personal information is used without their knowledge by another individual to commit a criminal act (identity theft). An imposter applicant uses the identity theft victim’s personal information, such as the victim’s name, date of birth, or Social Security number, as his own information on the rental application Qualification and selection of the incoming tenant is based upon fraudulent use of the identity theft victim’s information.

Unless the landlord discovers red flag issues or obvious discrepancies, the applicant may be approved for tenancy based upon the qualifications of the identity theft victim. When the fraudulent tenant defaults on his lease, the landlord will discover that his tenant was never who the landlord thought he was.

Synthetic Identity Fraud

Synthetic identity fraud is manufactured identity fraud. Applicants create a fictitious identity by combining real and fake information. If a landlord approves this applicant, the person using the false identity now has the means to use this identity and rental address to obtain credit or commit other types of fraud. The fraud may not be discovered until the tenancy is well along and may only be discovered if there is a material default of the lease. The landlord will likely suffer financial damage since the only information on file is a fictitious identity.

A landlord should be aware of the risk posed by professional tenants who never intend to pay rent. Identity theft and synthetic identity fraud can make it possible for an applicant to qualify for tenancy based on false information, occupy the unit but never pay rent, and finally skip out.

Application fraud can take other forms of false and misleading information used to qualify an applicant. An applicant may provide false references, using friends and family to act as a former landlord or employer to give previous rental and employment income information to the landlord calling to verify references on the application. Care should be taken to verify the identity of the reference and the source of information through appropriate independent sources. The check and balance system established by the landlord to help cross-reference information helps to identify this type of application fraud before harm is done to the landlord’s business.

Rental application fraud is costly and can have long lasting negative outcomes on business operations. Financial damage, property damage, increased evictions, increased operating expenses, and damage to the landlord/rental community’s reputation are some of the issues that can result from rental application fraud. Best practices for business operations must include strong tenant screenings and risk mitigation policies and practices.

Discovering a rental unit which is currently leased but apparently unoccupied leaves a landlord to question whether the tenant has abandoned the unit without giving notice or whether the tenant has left for an extended period for personal reasons.

There are a number of reasons that a tenant could be absent from their unit for a lengthy period of time. A tenant owing past due rent may skip out ahead of being evicted. Tenants have personal reasons to leave unexpectedly, such as being called to handle a family emergency, being arrested and held in jail, being hospitalized for medical reasons or simply taking a long vacation.

A landlord will need to establish reasonable evidence that the rental unit has been abandoned by the tenant in order to gain possession of the unit. The landlord cannot make an assumption regarding the tenant’s intent and action in absenting himself from the rental unit. The tenant may truly intend to return to the rental unit but has failed to communicate his absence and future plans to the landlord.

An unannounced departure by a tenant creates problems for a landlord in retaking possession of the rental unit. 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 quiet enjoyment of the rental unit. The tenant may file 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.

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 tenant personal property has been left behind in the unit.

An important first 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 proven by investigation of the matter.

In some cases, it is the tenant’s rent default that alerts the landlord to the tenant’s absence. Even when the landlord can establish the tenant’s rent default as probable cause for the abandonment, the landlord must fully investigate the circumstances to establish clear evidence supporting a finding of abandonment. Using a reasonable person standard, the landlord must follow due process of the law to investigate the matter and evaluate his findings. All reasonable efforts should be made to contact the tenant and documented in writings as to the type and number of attempts and the associated results.

If the landlord is able to contact the tenant directly, the landlord should inquire what the tenant plans to do, such as return to the unit or surrender the unit back to the landlord. If the tenant responds that he does not intend to return, the landlord should request that the tenant document in writing that the tenant has surrendered the rental unit to the landlord with no intention to continue the tenancy and return the unit keys to the landlord. With the tenant’s signature and date on the release document and the receipt of keys the landlord has evidence to transfer possession of the unit from the tenant back to the landlord.

If the tenant cannot be 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 to the unit, whether there are health 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 contacts to determine if they have information regarding the tenant’s plans, knowledge of the 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 mail a letter to the tenant with return receipt requested with notification of the address where the letter was delivered.

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 deliver 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.

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. State statutes will provide guidance on what to do with the tenant’s personal property if the tenant does not respond to the legal notice within the designated timeframe. 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.

In some states landlords may either 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.

Documentation of the process is important to protect the landlord against claims of wrongful actions. Documentation of every action taken should be done including reviewing status of the tenancy regarding lease default, efforts made to reach the tenant, notes from interviews with tenant emergency contacts, notes from interviews with neighbors, other attempts to locate tenant, notices sent, responses to notices, utilities correspondence and notice of shutoffs, returned mail, and storage receipts for safekeeping of tenant personal possessions. During unit inspections, conditions of the rental unit should be documented with photos and videos of each room, noting evidence of tenant personal property left behind. Abandoned vehicles should be reported to law enforcement to determine legal disposition.

A landlord may wish to consult with an attorney experienced in landlord-tenant matters if there is reasonable doubt whether the tenant has abandoned the rental unit. It may be the better practice to proceed with applicable legal actions, such as formal notice to the tenant and filing an eviction action in the applicable jurisdiction governing the property location.

As a practical matter to help minimize the negative impact of tenant abandonment, a landlord’s lease agreement should contain language that details specific terms about tenant abandonment of a rental unit and abandonment of tenant personal property. An extended absence clause included in the lease might state that the landlord requires the tenant to notify the landlord in advance of an extended absence by the tenant and that during the tenant’s absence from the rental unit the landlord may enter and inspect the rental unit as reasonably necessary to maintain the unit and inspect for damage and needed repairs.

There are some common mistakes that landlords make when conducting tenant screenings that create problems for their business. Some mistakes can be serious violations of applicable laws, such as fair housing requirements and landlord-tenant laws. Other mistakes result from outdated policies and practices when due diligence was not done to keep current with latest federal, state, and local requirements Failure to screen to legal compliances creates potential for business liability if the selected tenant turns out to be a safety and security risk during tenancy or affects the business due to rental income disruption.

Being in a hurry

One of the biggest mistakes a landlord can make is to rush the tenant screening process. Being in a hurry to fill a vacancy is rarely a good business practice. Many landlords, anxious to fill vacancies, create problems for themselves by rushing through the screening process, putting the business at risk for a troublesome, perhaps costly tenancy. A landlord helps to reduce business risks such as loss of rental income, legal liabilities, costs of eviction, property damage, and safety and security issues by conducting full, compliant tenant screenings.

Failure to screen

Some landlords choose not to screen rental applicants. This decision may be rationalized as a cost-savings business practice, or an urgent need to fill a vacancy. Choosing to disregard stated business policy by foregoing tenant screening can have a significant negative impact on the business. An unscreened tenant can create unplanned expenses due to property damage, reduced revenue due to loss of rental income, or costly early termination of the lease through eviction. An unscreened tenant is a stranger to the landlord presenting a potential threat to the business and potentially a threat to the safety and security of other tenants.

Relying on gut feelings

Some landlords rely on their gut feelings when meeting with prospective renters . Relying on instinct to evaluate an applicant’s qualifications for tenancy has potential for claims of fair housing discrimination as well as financial loss for the business. A gut feeling brings emotional, subjective bias into the screening process. Applicants should be evaluated to written objective, measurable business standards.

Non-compliance with Federal, state, and local laws

Fair Housing

The federal Fair Housing Act prohibits discrimination based on protected classes of race, color, national origin, religion, sex, disability, and familial status in the sale or rental of a dwelling and in other housing-related transactions .Violation of the Fair Housing Act can be costly. Penalties may include fines, punitive damages, and attorney fees.

Fair housing laws of states, cities, and counties may provide more stringent protections against housing discrimination than does the federal Fair Housing Act. It is important to know the fair housing laws that apply to the location of the rental property to meet legal compliance. The landlord must comply to the standards that give the greatest fair housing protections.

FCRA compliances

When landlords use consumer reports to aid in tenant decisions such as applicant screenings, the federal Fair Credit Reporting Act (FCRA) obligates the landlord to certain regulated practices to ensure FCRA compliance for the protection, privacy, and accuracy of consumer personal information. This may include a separate notice and disclosure requirement for applicant authorization and consent per FCRA requirements.

Other regulatory requirements

Tenant screening is subject to numerous federal, state, and municipal laws. Due diligence is required to ensure compliance with current regulations, restrictions and prohibitions for the applicable jurisdiction.

Failure to establish rental criteria

If there is no written rental criteria for screening to qualification, a landlord puts himself at risk for discrimination claims. There should be documented clear, nondiscriminatory policy in language readily understood that details the screening policy and the process for evaluation of the applicant’s qualifications. Policy documentation also helps in the prescreening process to allow prospective renters to self-select their interest and ability to qualify to standards. Some states have landlord disclosure requirements to inform prospective tenants of rental qualification policy and practices before application submission.

Inconsistent application of rental criteria

The best screening practice is to screen every applicant. If a landlord does not screen every applicant, there is discrimination. Inconsistent or selective use of screening could put the landlord in danger of being a victim of rent fraud or giving the perception of profiling applicants. Every applicant must be screened to the same business standard according to the same established screening procedure.

Not utilizing prescreening

Prescreening interviews provide opportunity for the landlord to preliminarily determine prospect qualification to standards. If a landlord does not prescreen inquiries from interested rental prospects, time is wasted if the prospect cannot preliminarily qualify to minimum standards. The earlier in the process that a landlord can screen for qualification, the more efficient and effective the screening practice is to the filling vacancy process.

Not using a written application

A rental application is the most efficient means to collect preliminary information about a prospective tenant to begin the process of qualification to rental standards. A landlord should not miss this opportunity to collect important relevant information about the applicant.

A landlord should not risk claims of discrimination by prejudging whether the rental prospect will qualify to standards. All applications from all interested prospects of legal age should be accepted and reviewed according to business policy for submission All applications should be verified for complete and accurate reporting of information.

Not conducting applicant interviews

A landlord misses an opportunity to request additional information from the applicant or to clarify information on the application if the landlord does not conduct an applicant interview.

A landlord must be knowledgeable of fair housing laws to understand what questions are permissible and what questions are not permissible during an interview.

The interview is a time to confirm the applicant’s responses to the questions regarding the completed application form. By confirming the applicant responses, a landlord prepares for the verification process at the source document or source entity. While a landlord may want to get to know the applicant, it should be remembered that the landlord-tenant relationship is a business relationship, contractual to specific duties and obligations. Questions asked must be relevant to business purpose and not stray into personal or non-essential topics. A professional working relationship between landlord and tenant will be a best practice for both landlord and tenant. A landlord should be clear in the expectations for tenant duties and behavior and follow legal compliances for disclosures and notification to tenants.

Not conducting a full, complete tenant screening process

A full, consistent, uniform tenant screening process helps the landlord obtain a big picture view of the applicant and his qualifications. Failure to conduct one or more screenings can create liability for the landlord and potentially impact his business. Full screening includes screening for:

• Consumer Credit Report – A credit report provides the landlord with an applicant’s credit history as reported to a credit reporting bureau as of a certain date. The credit history shows the applicant’s credit usage and credit management. By analyzing the data, the landlord evaluates whether the applicant could be a potential financial risk if selected as a tenant.
• Background Checks – Landlords must comply with federal, state, and local laws that regulate or prohibit the use of criminal history background for tenant screenings. A landlord’s blanket policy that excludes any person who has been convicted of any offense is discriminatory and violates provisions of the Fair Housing Act. A landlord must determine applicable compliances for the jurisdiction governing his rental property regarding the use of background checks for tenant screenings.
• Public Records Search – A public records search for an applicant’s bankruptcy, liens, judgments, and eviction records may be conducted to determine potential financial risk to the landlord’s business.

The landlord must also conduct verification of income, employment, and references to complete the screening process.

• Income verification – A tenant’s ability to pay full and timely rent ranks as of the top concerns for landlords. Failure to conduct adequate verification of income can mean potential problems with late or missed rent throughout the tenancy. A common mistake in screening for income is source of income discrimination. Some states, cities, and counties have passed fair housing laws to include source of income protections. In these jurisdictions landlords must incorporate source of income (SOI) protection into fair housing policies and rental practices. A landlord cannot reject a rental applicant on the basis of the applicant’s source of income as long as the income is from a lawful source. Fair housing protections for source of income do not prohibit a landlord from setting his rental criteria to include income qualification sufficient to meet rental obligations.
• Employment verification – For many applicants, employment verification of current employment status and wages/earnings is income verification. A landlord should verify the accuracy of the employment information supplied on the rental application by directly contacting the employer with an information request.

No verification of rental references

Contacting landlord references to verify previous rental history information should be a screening practice conducted for all applicants. Rental history is as important as credit history in the tenant screening process. The applicant’s past pattern of rental behaviors with landlords and fellow tenants may give clues as to how he will conduct himself as a tenant in his future choices for rental housing.

Failure to keep complete and accurate documentation of rental matters

Failure to keep accurate documentation of important landlord-tenant interactions puts a landlord at risk. Documentation is key to defending against charges of discrimination or to show cause in a landlord’s court action for tenant eviction. Any communication with a prospect, applicant, or tenant should be documented and retained for at least the period required by statute. Without written documentation of policies, practices, forms, interviews, or other rental records, it will be a landlord’s word against a claimant’s allegations.

Failure to conduct due diligence

A landlord should prioritize conducting due diligence for new and proposed legislation that impacts the rental business As a business owner a landlord must know the regulatory climate rules and regulations that affect his business.

There is a greater responsibility for landlords under their obligation of duty of care to tenants to protect them from known risks to persons and property. That duty too falls under the landlord’s due diligence to actively manage his properties according to legal requirements for habitability and tenants’ rights by statute.

Mold and mildew result from moisture problems in the rental property. Landlords must take appropriate, timely action when notified by a tenant of mold problems in the rental unit or as discovered by maintenance inspections of the rental property. Moisture problems can be quite costly in terms of physical damage to the rental property, cause financial harm to rental operations, and adversely affect physical health of individuals exposed to the presence of mold.

Moisture issues are quite common in rental operations. Landlords should have rental policies and practices to identify and address mold and mildew issues. To prevent mold growth, there must be moisture control protocols in place. In as little as 48 hours in a moist environment, mold spores can grow into mold problems. With regular property inspections and requiring tenants to promptly notify the landlord of water damage/mold issues a landlord can reduce conditions favorable to mold growth and subsequent damage. However there can be other incidents of moisture damage caused by natural events such as storms and floods, as well as environmental issues such as localities with generally humid conditions that can contribute to a greater number off mold events.

Molds multiply by producing microscopic spores that travel back and forth from outdoors to indoors attaching themselves to people, pets, and possessions. The number of mold spores suspended in indoor and outdoor air fluctuates from season to season and day to day Spores are everywhere and exposure to them cannot be avoided. Everyone is exposed to molds on a daily basis and most people are unharmed by their exposure. It is not practical, probably not even possible, to eliminate all molds and mold spores indoors.

Regular Scheduled Inspections

A visual inspection of the rental property is one of the most effective ways to detect a moisture problem and the presence of mold. Regular inspections of the property’s exterior and interior spaces can help identify a mold problem or potential problems that could cause mold and mildew issues.

Scheduled property inspections should be done for vacant units as well as occupied units. If units have been vacant for some time, particularly if air conditioning units have been turned off, high heat and humidity can build up in the unit and provide a breeding ground for mold and mildew.

Mold can be generally identified by fuzzy irregular shapes appearing in a wide variety of colors including black, brown, green, gray, white or yellow. Mildew is generally identified as a flat, powdery substance on the surface of objects. Mildew is lighter in color than mold, usually white, grey, or green color.

Although visual signs of mold are not always obvious, the musty smell of mold is another way to discover moisture/mold problems. Mold can grow on the hidden surfaces behind paneling and wallpaper; the top of ceiling tiles; beneath carpet and pad; or inside heating and cooling ducts. Attics, crawl spaces, and basements provide many opportunities for mold growth. Areas inside the wall around plumbing or heating/cooling ducts may have condensation that is trapped and causes water damage. Hidden mold growth should be investigated cautiously since there is the potential to release massive amounts of new mold spores into the air causing additional problems.

As the mold grows, the organic material is destroyed. Allowed to grow, mold can cause serious damage to property and furnishings. Molds can rot wood, damage drywall, and eventually cause structural damage to buildings. Mold can cause stains and other cosmetic damage to furnishings.

Controlling indoor moisture significantly limits mold growth. Mold does not need a lot of water to grow. A little condensation in a bathroom or around a windowsill can be enough to start mold growth. Common sites for indoor mold growth include bathroom tile and grout, basement walls, ceiling tiles, areas around windows, floor coverings near sinks, and leaking plumbing and plumbing fixtures. Other common sources of moisture include roof leaks, condensation due to high humidity, sprinkler systems, and flooding.

Mold and Mildew Health Concerns

Serious health problems, potentially life threating, can occur when individuals are subjected to prolonged or high-level exposure to mold. Even brief exposure to the presence of mold can cause irritation to an individual’s eyes, nose, throat, skin, and lungs.

Landlord Responsibility

As of this writing there is no Environmental Protection Agency (EPA) standard or Threshold Limit Values (TLVs) for airborne concentrations of mold or mold spores in residential buildings. There are governing regulations that vary by state or municipality location regarding hazardous conditions which include mold.

In some states the landlord is required to disclose any hazardous conditions to potential tenants before lease signing. The majority of states hold a landlord responsible under the implied warranty of habitability to provide and maintain rental housing that is fit and habitable. Negligence by the landlord in maintaining the rental property to good condition would be a material violation of landlord responsibilities and obligations under the habitabilty warranty statutes.

Mold/Moisture Lease Addendum

A tenant bears responsibility to conduct good housekeeping practices during tenancy to maintain the rental unit to the same good condition the tenant received at move in. Many landlords utilize a mold/moisture lease addendum to emphasize the importance of preventing mold in the rental unit and to detail housekeeping practices that can prevent mold intrusion.

In addition to housekeeping requirements, the addendum requires the tenant to notify the landlord of any mold growth on surfaces inside the tenant’s dwelling unit; to notify the landlord immediately of any circumstances involving excess moisture such as water leaks or drips, sweating pipes or toilet tanks as well as any water overflows in kitchens, laundry facilities, and bathrooms, especially in circumstances where water overflow may have permeated walls, floors, carpeting or other floorcoverings or cabinets. Excess water shall be immediately removed to prevent further damage. Tenant agrees to allow landlord to enter dwelling unit to inspect and make necessary repairs for mold and moisture issues.

Mold Remediation

Some states may require the landlord to remediate the mold problem as opposed to mold removal. If remediation is required, the landlord may be held to a legal definition of the term mold remediation as “the removal, cleaning, sanitizing, demolition, or other treatment, including preventive activities, of mold or mold-contaminated matter that was not purposely grown at that location.” Some states specify a time frame for the landlord to repair the mold problem, while other states may use a “reasonable” time period. The time to repair the mold problem starts the day the tenant’s request or notice is received by the landlord. Most states require the tenant to notice the landlord in writing of the presence of mold and request a correction of the problem.

Some states address tenant remedies if the landlord fails or refuses to act in compliance with landlord obligations for mold remediation. Options are contingent upon the tenant noticing the landlord in a timely and appropriate manner and allowing specified time per statute for mold treatment repairs. Tenant remedies for landlord failure to cure a mold problem include:

• Terminating the lease without incurring landlord penalties or loss of security deposit
• Withholding rent
• Paying reduced rent
• Paying for mold remediation and deducting the cost from the rent
• Suing the landlord for damages incurred due to landlord failure to comply with his obligations
• Notifying appropriate regulatory agency of landlord default in maintaining habitable premises and disclosure of building code, health, safety violations

Landlord Retaliation

In most states it is illegal for a landlord to retaliate against a tenant because the tenant requested repairs or remediation to mold infestation.

Landlord Liability Issues

Landlords should take proactive prevention measures and remediate problems as soon as discovered. Detailed written moisture/mold protocols help to reduce landlord liability and minimize the possibility of litigation over mold damage to property and tenant health.

Landlords may have potential and substantial legal liability to tenants for mold damages. Possible compensatory damages to the tenant include expenses for (1) medical mold diagnostic and treatment procedures, (2) loss of earnings, (3) mold damage to clothing, furniture, and other personal property, (4) rent differentials when tenants must move to a higher cost mold-safe place, (5) moving expenses, (6) various tenant expenses including mold inspection and testing, (7) remediation of the rental unit, (8) remediation and/or replacement of tenants’ damaged personal property, and (9) jury-awarded punitive damages.