Managing investment properties is tough business. Almost every landlord has heard of or dealt with the horrors of an unruly tenant and tenant evictions. Property managers must know the law, rental policies and practices, the pertinent documentation and disclosures to provide their tenants, and how to negotiate and write a lease, to name a few qualifications. One of the skills a good property manager must possess is the ability to properly screen tenants. While most tenants are good folks, there are steps that every landlord should take to protect themselves against leasing their property to unruly tenants. Here are a few tips to get started.
Federal and state antidiscrimination laws limit what you can say and do in the tenant selection process. When choosing tenants, keep in mind the following best practices.
Check credit, income, and references. Today you can easily run a credit check for a minimal fee. Also, you can and should call the tenant’s references, especially former landlords. You should also verify an applicant’s employment, income, and bank account information. Be consistent in your screening. Make it your policy, for example, to always require credit reports; don’t just get a credit report for a single parent or people of a particular nationality.
Make decisions based on business reasons. You are legally free to choose among prospective tenants as long as your decisions are based on legitimate business criteria. Don’t make choices based on personal reasons. You are entitled to reject applicants with bad credit histories, income that you reasonably regard as insufficient to pay the rent, or past behavior — such as property damage or consistent late rent payments — that makes someone a bad risk. It goes without saying that you may legally refuse to rent to someone who can’t come up with the security deposit or meet some other condition of the tenancy.
Understand fair housing rules. Fair housing laws specify clearly illegal reasons to refuse to rent to a tenant. The Federal Fair Housing Acts (42 U.S. Code §§3601-3619, 3631) prohibit discrimination on the basis of race, religion, national origin, gender, age, familial status, physical or mental disability (including recovering alcoholics and people with a past drug addiction). Many states and cities also prohibit discrimination based on marital status or sexual orientation.
Train your staff to understand the rules, too. Anybody who deals with prospective tenants must follow fair housing laws. This includes owners, landlords, managers and real estate agents, and all of their employees. As the property owner, you may be held legally responsible for your employees’ discriminatory statements or conduct, including sexual harassment.
Be consistent. Consistency is crucial when dealing with prospective tenants. If you don’t treat all tenants more or less equally — for example, if you arbitrarily set tougher standards when renting to members of a racial minority — you are violating federal laws and opening yourself up to lawsuits. And if you give one person a break (such as lowering the security deposit for a single mother but not for other tenants), you’ll likewise risk a charge of discrimination from other tenants.
At Franco Real Estate, our property management department prides itself on devloping a systematic procedure for managing properties. We offer end to end packages, from procuring tenants and writing the lease to collecting rents and working directly with tenants. For more information on our products and services, visit our property management center at www.JosephCapote.com.
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This information is does not constitute investment, financial, or tax advice. We are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided in this letter.
Filed under: Uncategorized, Property Management, tenants
Joe Capote 