Credit History

Landlords have traditionally used the credit report as a cornerstone of tenant screening. 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. In requesting an applicant’s credit report, the landlord wants to analysis the credit history to evaluate whether the applicant could be a financial risk if selected as a tenant. The landlord is looking to determine whether the applicant has the ability and willingness to fulfill terms and conditions of a lease agreement for full and timely rent payments.

Due diligence by the landlord is again required for compliance with ordinances in some localities. A landlord in some cities may be prohibited from rejecting an applicant on the basis of an insufficient credit score or insufficient credit history.

A landlord screens an applicant to determine if the potential tenant would be able to meet a tenant’s required rent obligations. Accordingly, one of the first tenant screenings to conduct is verification of the applicant’s employment and income. If the applicant cannot qualify under the landlord’s financial criteria, there is no need to proceed with other screening reports.

Generally a landlord can request whatever financial information is required to verify the applicant’s ability to pay under the landlord’s legal, business supported rental criteria, provided the same standards are required of all applicants.

To verify employment status, a landlord can request an applicant to submit acceptable documentation from his employer, such as a current pay stub.

While wage earnings are the most common type of income, non-employment income could be verified by a landlord on a case-by-case basis with a verifiable document, such as an official statement of receipted funds and statement balances. A landlord should verify whether his state statutes or local ordinances have made source of income a protected class. As long as the applicant’s income comes from a lawful source, which includes Section 8 vouchers, a landlord cannot reject an applicant based on the source of his income.

Many landlords use the industry standard of 3:1 income to rent ratio. However, in localities that have enacted ordinances for low barrier screening for rental applicants, the landlord is required to use a 2.5 income to rent ratio for affordable housing rentals or a 2.0 ratio for subsidized rental housing. This is another reason that a landlord should verify his state and local requirements for tenant screenings.

As more cities enact rental housing ordinances and states continue to add or revise landlord-tenant statutes, there is correspondingly significant impact on landlord business management policies. Legislative efforts that move toward more inclusive tenant screening and selection practices do not prohibit a landlord from operating to his business necessity. However the new regulations have requirements and prohibitions on certain rental practices that could change a landlord’s policies and practices for rental qualification criteria, screening, and selection. In some circumstances a landlord may be required to conduct individualized assessment of an applicant’s qualifications and history.

There are many types of tenant screenings that provide data for applicant qualification to rental standards and consideration for tenancy.  A landlord will need to pay particular attention to the applicable laws and ordinances in effect for the location of his rental property. In some areas scheduled implementation dates of new legislation have been postponed until a later this year. A landlord must be prepared now for the compliance that will be required. Compliance efforts should include a review of policy and practices including all forms and documents used in his property operations. Landlord screening policies and practices will need to be re-formulated to business necessity and compliance. Tenant screenings retain the same business purpose of risk management to qualify applicants to rental standards for ability to meet lease terms and conditions, to pay full and timely rent, to respect tenant neighbors, and to maintain the rental unit to good condition.

As a recommendation for areas particularly affected by issues of affordable housing, rental practices for screening prospective tenants has begun to focus more attention on qualifying applicants on such factors as income and employment verifications, credit history, and rental references.

The tenant screening practices discussed below are selected screenings recommended by some metropolitan areas as guidelines for landlords to determine if an applicant would be a good renter.

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

For most states, basic requirements for habitable housing include:

• Maintenance of systems for electrical, plumbing, heating and/or cooling, ventilating, sewage and sanitation
• Supplying potable water and hot water
• Providing for trash collection and removal
• Maintenance of common use areas

A landlord should check his state statutes and local ordinances to determine whether there may be additional requirements to ensure habitable conditions. Requirements could include climate protections such as weather-proofing measures for protection from extreme heat and cold, waterproofing, severe weather shelters and environmental hazards protections including pest extermination. There may also be requirements by state and local housing codes for health and safety protections.

Landlord provided amenities are typically not covered under the warranty of habitability. Amenities, while not considered essential for living, add to the comforts of rental living as well as provide value-added incentives to attract potential tenants. A landlord should be aware, however, that if a landlord does provide amenities, in most jurisdictions, the landlord will be required to maintain and repair those amenities.

Painting a unit will often make a rental unit more attractive to prospective tenants but is usually not a requirement in most jurisdictions. However you should always check your state’s landlord-tenant statutes and local ordinances to determine if they address the issue. Landlord-tenant statutes of most states require only that a landlord provide clean and safe habitable housing but local laws may regulate landlord responsibilities differently. As example, as of this writing, the New York City Housing Maintenance Code painting law has specific requirements for landlords regarding the issue.

In general, painting of a rental unit is considered a cosmetic issue. Painting is usually done at the landlord’s discretion for scheduled property improvements or as necessary for property repair issues. If there are no governing statutes or ordinances for your property location and the interior of the unit has been maintained in good condition, a thorough cleaning of all surfaces would usually be enough to freshen up the unit.

What does your lease agreement say regarding tenant alterations and improvements? In many leases there is language that prohibits tenants from making alterations and improvements to rental property. As example, a lease clause might read:

“Except as authorized by statute or as authorized by the prior express written consent of Landlord, Tenant will not make any repairs, alterations, or improvements to the premises including but not limited to painting, carpeting, wallpapering, electrical or lighting changes, nailing holes in the wall, rekeying of locks, installation of new locks or installation or alterations of alarm systems.”

The lease agreement might also contain a notification clause such as:

“Tenant accepts the rental unit, fixtures, and furniture as is. Unauthorized Tenant repairs, alterations, and improvements are a material violation of the Tenant’s Lease Agreement and subject to lease default remedies as stated in the lease agreement.”

Also keep in mind that many lease agreements define that any attachments to the property become a permanent fixture to the property. Absent lease language to the contrary or a documented landlord-tenant agreement returning specified objects to the tenant, the attached fixtures become the landlord’s property. Be sure you know what your lease says and understand exactly what the tenant is requesting.

You are fortunate that your tenant has asked for your permission to make an alteration to your property rather than having the work done without your knowledge and permission. A straightforward request from a tenant for an alteration or improvement to the unit allows the landlord and tenant to consider options to determine if the alteration or improvement could be allowed. A landlord should require tenants to submit written requests for alterations and improvements.  A landlord may want to determine whether the improvement or alteration is work that could be easily undone (repaired or restored) when the tenant moves out. Another consideration might be whether the proposed improvement might add value to the rental unit. If the improvement is an object that the tenant wants to take with him/her upon moving out, the landlord and tenant must document their agreement in writing. A landlord might be receptive to approving an alteration if the tenant understands that he/she will be responsible for restoring the unit to its original condition at the end of the lease term. If the landlord deems the tenant’s restoration work is unacceptable under workmanlike standards, the landlord will deduct the costs of repairing or restoring the unit from the tenant’s security deposit.

The authorization agreement between landlord and tenant should be documented in writing with specifics regarding the scope of the work, material to be used, whether the alteration or improvement would be fixed (permanent) or portable and the terms of tenant reimbursement if any. Without such an authorization agreement, a dispute between landlord and tenant could occur when the tenant’s lease expires and the tenant wants to remove the attachment. If the matter ends up in court, the court will need to determine whether the attachment should be considered a permanent fixture belonging to the landlord or portable object that the tenant could take with him/her at move-out.

To help determine whether an object is portable or permanent, a court may look to the specifics of the issue, such as (1) whether the tenant received the landlord’s permission for installation or attachment of the object; (2) did the object require structural changes that affected the use and/or appearance of the unit/property; (3) did the installation of the object require firm attachment to the property using nails, screws, bolts, permanent bonding, or cement;  and (4) what did the landlord and tenant intend to happen regarding the object.

Landlords have a general duty of care to provide a safe and habitable living environment for their tenants. As part of that duty landlords can be held responsible to know what is going on at their rental property.

Reasonable foreseeability

Landlords have the duty to prevent possible criminal activity at their properties if there is sufficient reason to believe that a crime may be committed there. Reasonable foreseeability of a crime on the property can be established by prior occurrences of criminal activity on the rental property as a result of such factors as inadequate security measures or a landlord’s non-compliance with required state and local housing and building safety codes.

In the event that a crime is committed on the rental property, to determine a landlord’s responsibility, a court would review facts of the case to determine whether the landlord was negligent in complying with required safety codes or the landlord failed to provide adequate security measures, any of which resulted in or was a contributing factor in the commission of the crime.  A court would evaluate the probability of harm from a criminal act versus the landlord’s burden of duty of care responsibility to provide for the safety and security of his tenants in proving a breach of the landlord’s duty.

In general, if the probability of harm from a criminal act is greater than the landlord’s burden of duty of care to provide tenant protections, then a landlord is required to implement security measures at the rental property at the highest level that provides protection from a reasonably foreseeable criminal act.

Drug Dealing

Landlords have a duty of care to protect the neighborhood as well from illegal activities of tenants. The most common type of illegal activity in rental properties is drug dealing.

A landlord should be alert to signs of suspicious activities at the rental property that could be an indication of drug related activities. Caution is advised that before jumping to an erroneous conclusion or confronting a tenant; a landlord should first determine the facts. Should there be strong indications or evidence of illegal activities including drugs, a landlord may want to contact local law enforcement to determine how to proceed.

While few landlords would want to believe their good tenant is also a drug dealer, a landlord cannot just look the other way, refuse to acknowledge a problem or refuse to take corrective action. A landlord may be held liable for injuries or losses resulting from criminal activities on the rental property. It is possible a landlord may be sued under the legal theory that the rental property has become a public nuisance that seriously threatens public safety or morals. If a landlord allows illegal activity to continue or refuses to cooperate with law enforcement, federal, state, or local authorities may levy significant fines or seek criminal penalties against the landlord for knowingly allowing drug dealing on the rental property. In rare circumstances governing authorities could file a civil asset forfeiture complaint to seize and/or forfeit the property.

While conducting property inspections, a landlord should be alert to unusual odors that could be as a result of drug manufacture or use of drugs. Neighboring tenants may be the first to complain about odd smells coming from a nearby unit. A landlord should always respond promptly to tenant complaints about drug dealing or activities related to drug use or manufacture. If complaints are founded, a landlord should take appropriate action to terminate the offending tenant’s lease, file for eviction and involve law enforcement as required.

A landlord should be observant of frequent traffic in and out of the rental premises throughout the day and night, particularly traffic to only certain units and only for a short time. While it could very well be related to drugs, there could be other reasons which would need careful investigation.

A good tenant is often described as quiet, keeping to himself, and prompt with the rent. Such a tenant could also be conducting illegal activities while staying below the landlord’s radar. If a tenant rarely leaves the rental unit and always has the blinds down, it may be appropriate with careful consideration of the circumstances to conduct a welfare check on the tenant. A landlord should have some concern for a tenant’s well-being but not at the expense of a drug dealing operation.

In addition to legal problems that can be caused by drug-related criminal activities, landlords can find it difficult to find and keep good tenants. Word-of-mouth reputation as a bad property can seriously impact the landlord’s rental operations.

Fair Housing Act

Screening prospective tenants is a high priority risk management practice. In the course of tenant screenings a landlord may discover an applicant’s history of past drug addiction. A landlord cannot refuse to rent to a person solely because the person is a former drug addict.  Drug addiction is a covered disability under the Fair Housing Act (FHA). Refusing to rent to a person with a disability is a violation of the FHA.

However while drug addiction is protected as a disability under the FHA, a person who currently and illegally uses drugs is not protected by fair housing laws.  A landlord does not have to rent to a person who violates the law by Illegal drug use.

Lease Agreement

Most landlords utilize a lease agreement that contains specific language that prohibits tenants, their guests or invitees from using the rental property in such a way as to violate any law or ordinance including laws that prohibit the use, possession, or sale of illegal drugs; severely damaging the rental property; or causing disturbances that interfere with other tenants’ rights of quiet enjoyment of the rental premises.

Strict enforcement of lease terms and conditions by the landlord is required to protect the safety, security, and rights of the tenants. Landlords should take appropriate and timely actions as necessary to remove a tenant who materially violates his lease agreement by troublesome or disruptive behaviors or who violates the law. A landlord’s failure to take corrective action can create liability for the landlord for injuries to tenants as a result of illegal activities including drug use, drug dealing, or drug manufacturing on the rental property.

Prevention Measures

A landlord can help prevent criminal activity at his rental property by implementing safety and security measures such as:

• Conducting regular property inspections
• Installing adequate exterior lighting including motion detectors
• Installing security and safety devices such as deadbolt locks on doors and window locks per state and local building code requirements
• Controlling access to rental unit keys
• Responding promptly to tenant concerns and complaints about safety and security
• Responding timely to property repairs and maintenance requests
• Utilizing a strong lease agreement including lease language prohibiting illegal activity on premises
• Enforcing lease terms and conditions including eviction as necessary
• Consulting with security professionals to assess current security measures and update as necessary to prevent illegal activity on the rental property

Additionally a landlord should share information with tenants about crime prevention. If there have been reported incidents of criminal activity in the local neighborhood, a landlord can alert his tenants to possible risk. At the same time a landlord can provide updated information about the safety and security measures that are implemented at his property for the tenants’ protection. However, tenants should also be reminded that they, the tenants, are fully responsible themselves to take necessary precautions to protect themselves from harm.

In general, “Cash for Keys” is an agreement between a landlord and a tenant whereby the landlord pays the tenant to vacate a rental property in exchange for an agreed upon sum of money at an agreed upon date. The agreement can be negotiated for an early lease termination date for such reasons as a landlord needing to completely remodel a unit, a landlord needing to move into the unit himself, as a condition for the sale of the property, or a new buyer wanting to turn over units to bring rents up to market rents. Many landlords are somewhat familiar with a “cash for keys” agreement that provides incentive for non-paying tenants, and tenants who have defaulted on other lease terms and conditions to move out before being served with eviction notices. The cash for keys agreement is a negotiated voluntary termination of the lease and tenants who accept and comply with the agreement could avoid having an eviction on their record. In many cases the “cash for keys” agreement is a less expensive option for the landlord than the required court process for eviction.

Landlords who want to consider a “cash for keys” agreement may find it advisable to consult the laws for the unit’s particular location or to consult a knowledgeable attorney to determine what circumstances and under what conditions it would be legally permissible to offer such an agreement.

While a few states may have a requirement that a tenant must provide a landlord with a forwarding address as part of the tenant-move-out responsibilities, most state statutes do not address the issue. You should make a good faith effort to comply with your state statutes regarding the time to prepare the accounting statement and return of security deposit funds. Since the only address you have for the former tenant is the address of the rental unit, you should mail the security deposit accounting statement and a check for any balance of funds to the rental address. If the former tenant has notified the post office of a change of address and requested forwarding, the post office will forward the statement to the new address. For compliance you should use certified mail with a return receipt requested to prove your timely compliance with statute requirements.

If the former tenant did not request forwarding service from the post office, the statement should be returned to you. You should keep the postmarked envelope, unopened, as proof of your good faith effort in compliance in the event that the former tenant comes forward at a later date to claim you did not properly follow the statute’s requirements. As you think is necessary you could send a second mailing at a later date just in case a change of forwarding with the post office was made later. You should not re-send your original mailing but keep that as proof of compliance. If the former tenant had provided emergency contact information on his application or other rental documents, you could try contacting that person to see if the contact could provide a forwarding address for the former tenant. Other than making reasonable effort to locate the former tenant, you may want to consult with a landlord-tenant attorney to determine what further steps should be taken under your state statutes.

You should first check your state’s landlord tenant law regarding procedures for tenant move-out inspections and security deposit deductions for tenant damages and cleaning costs outside of ordinary wear and tear on the unit.

Many times tenants are aware that damages exist and want to reduce the amount of deductions from their security deposits. Accordingly, some tenants may ask for a second chance to do additional cleaning or repair the damage before a landlord does a final itemization and accounting of the security deposit. In a few states a landlord is required by statute to offer the tenant a second chance  at cleaning before cleaning costs are deducted from the security deposit. You may, as a goodwill gesture, consider offering the tenant a second chance, particularly if there are mitigating circumstances and the tenant has always performed to standards during the tenancy.

A landlord should be cautious in allowing a tenant to repair damages to the unit. There is potential liability to the landlord for future liability claims if a new tenant suffers injury or damage as a result of poor or defective repair work by the vacating tenant.

In some states a tenant has the right to a pre-move-out inspection. During a joint landlord-tenant pre-move-out inspection the landlord identifies what defects need to be corrected by the tenant in order for the tenant to optimize his security deposit refund.

If the additional cleaning time is beyond the tenancy termination date, it may be advisable to document in writing that a former tenant’s access to the premises for the purposes of cleaning does not constitute an extension of the lease or continue/create any other benefit of tenancy.

There may be situations where the landlord is willing to offer the tenant the opportunity to correct certain deficiencies whether or not required by law. Additional cleaning may be allowable, but serious consideration should be given to anything other than that. Considering anything beyond cleaning, the landlord must determine the tenant’s ability to do the necessary work and produce an acceptable result without creating additional damage, something usually impossible to do.

The landlord should also consider the potential risks involved in allowing the tenant, likely a home handyman, to ever repair or replace anything. The potential liability of defective or imperfect work is often too great for the dollar amount involved. If the rental unit is to be re-rented immediately the availability of the former tenant to complete the work may be in conflict with the new tenant’s move-in date.