Every Landlord's Guide to Finding Great Tenants
The comprehensive resource
Janet Portman, Attorney
July 2013, 3rd Edition
Searching for the perfect tenant? Get the only book devoted to the most important decision a landlord can make!
Landlords face many challenges, but choosing new tenants has the greatest potential to affect your bottom line. Fortunately, Every Landlord's Guide to Finding Great Tenants can help you find the right tenant for your rental property!
Let this book guide you through the process of attracting, screening and selecting the best renters available. Get timely advice on:
- effective advertising
- phone screening
- presenting the unit
- evaluating applications
- examining credit reports
- checking references
- discrimination basics
- making a rental offer
- rejecting applicants
Every Landlord's Guide to Finding Great Tenants provides dozens of forms and checklists for every step, with easy instructions to fill them out. This edition has been fully updated to reflect the latest changes in the law in your state, including California's updated rules about checking a potential tenant's immigration status. Plus, get all the legal forms you need, as well as invaluable audio dialogues that show you how to conduct interviews and get essential information without running afoul of the law.
“A treasure trove of information…a must-read.”-Helene Lesel, Syndicated Columnist, Los Angeles Times
“Bravo! Authoritative in an easy-to-read style.”-Mark Nash, Author & Columnist, Realtytimes.comHow you choose your tenants is one of your most important decisions. Here’s an extensive and helpful reference book.”-Rent.com
Forms for Working With Current Tenants
- Move out Letter
- Pre Move-Out Inspection Request
- Pre Move-Out Inspection Request for California
- Pre Move-Out Inspection Report
- Landlord's Plans to Advertise and Show Rental
- Departing Tenant's Questionnaire
- Letter of Recommendation
- Pre and Post Tour Survey with Current Tenants
Forms for Developing and Implementing Your Marketing Strategy
- Marketing Worksheet
- Tenant Referral Program
- Employer Referral Amendment
- How to Show This Rental Worksheet
- Checklist for Repairs and Refurbishing
Forms to Give to Applicants
- Rental Policies
- Rental Application
- Rental Application Instructions
- Consent to Contact References and Perform Credit Check
- Credit Check Payment
- Receipt for Credit Check Fee
- Consent to Criminal and Background Check
- Legal Status in the United States
- Rental Property Fact Sheet
Forms to Help You Evaluate Applicants and Track Your Screening
- Rental Property Comparison Chart
- Tenant Information Sheet
- Application Review
- Credit Report Evaluation
- Tenant References
- Tenant Screening Firms Comparison
Forms to Help You With Your Open House or Tour
- Visitor Log for Open House
- Showing Checklist
- Visitor Information
Forms to Use When Accepting and Rejecting Applicants
- Acceptance Letter
- Notice of Conditional Acceptance Based on Credit Report or Other Information
- Notice of Conditional Acceptance, Cosigner Required
- Cosigner Agreement
- Holding Deposit Agreement and Receipt
- Adverse Action Based on Credit Report or Other Information
- Response to Request for Further Information
- Denial of Request for Further Information
- Rejection Letter
Audio Segment (MP3)
- Segment One: Complaints and concerns
- Segment Two: Discrimination
- Segment Three: Challenging you about perks from the competition
- Segment Four: Occupancy issues
- Segment Five: The mistake of puffing
- Interview with attorney Janet Portman
*Audio files are not available with the ebook
An executive editor at Nolo, Janet Portman oversees editorial work on all Nolo books. She specializes in residential and commercial landlord/tenant law, legal issues related to courts, landlords and tenants, and neighbor disputes. She is the author or a coauthor of Every Landlord's Legal Guide, Every Landlord's Guide to Finding Great Tenants, First-Time Landlord: Your Guide to Renting Out a Single-Family Home, Every Tenant's Legal Guide, Renters' Rights, Negotiate the Best Lease for Your Business, Leases & Rental Agreements, The California Landlord's Law Book: Rights and Responsibilities, and California Tenants' Rights. Portman received undergraduate and graduate degrees from Stanford University and a law degree from Santa Clara University. Before joining Nolo in 1994, she practiced law as a public defender.
Janet's Other Pages
Table of Contents
Choosing Good Tenants Makes Good Business Sense 1
What's the law got to do with it? 3
Is this book for you? 4
Ten ways to keep your rental business profitable 5
How to use the Landlord's Forms Library 12
Why good record keeping is so important - and how to do it 13
Complying With Discrimination Laws 17
Fair housing complaints are numerous and costly 19
Legal discrimination: Valid reasons for rejecting applicants 21
Rental properties exempt from antidiscrimination laws 26
Types of illegal discrimination 27
Occupancy standards: How many tenants are too many? 39
Managers and discrimination 41
How to Deal With Current Tenants'
Before You Look for New Ones 43
Send departing tenants a move-out letter 46
Do a pre-move-out inspection of the rental 47
Inform tenants of your plans to advertise and show the rental 53
Ask departing tenants to complete an exit questionnaire 56
How to work with tenants who are not leaving voluntarily 61
What happens when you can't deliver the rental on time? 64
How to Advertise Effectively 73
Identify your market 75
Create a Marketing Worksheet 78
Use word-of-mouth 80
Set up a tenant referral program 81
Post "For Rent" signs 84
Advertise in the newspapers 85
Use an online rental service 94
Post flyers on neighborhood bulletin boards and online 95
Make your own website 97
Take advantage of free listings on craigslist.org 97
List with local employers 98
Use a real estate office to advertise for and screen tenants 102
How Should You Show Your Rental? 107
Individual property tours 110
Private open houses 115
Public open houses 118
Preparing Your Rental Application and Screening Materials 125
Your rental policies 129
Your rental application 146
Consent to contact references and perform credit check 157
Credit check payment 157
Receipt for credit check fee 159
Consent to criminal and background check 162
Legal status in the United States 162
Lease or rental agreement 165
Fielding Initial Questions and Phone Screening 181
Make it easy to reach you 185
Prepare a Rental Property Fact Sheet 188
Prepare a Rental Property Comparison Chart 191
Prepare a Tenant Information Sheet 194
How to prescreen over the phone or in person 195
Carefully document your conclusions 204
Dealing with on-the-fence callers 205
Schedule a site visit 206
Should you negotiate on the first call or conversation? 208
Prepare Your Rental for an Open House or Showing 209
Prepare the rental unit for an attractive showing 210
Prepare the rental unit for a safe showing 212
Prepare the rental unit for a secure showing 213
How to plan for and do repairs and refurbishing 219
Face to Face: Showing the Rental and Negotiating
With Prospective Tenants 223
How to hold an open house 225
How to conduct an individual showing 234
Talk with your visitors and answer questions 240
Field questions thoughtfully 243
Sell your property, but don't puff 247
How to negotiate with prospective tenants 252
Discussions with applicants with a disability 255
Identify prospective tenants 257
What's the next step for your visitors? 257
Conduct a wrap-up 264
Evaluating Rental Applications 267
Log in every application 272
Confirm receipt of credit check fee and consent form 272
How to review Rental Applications 273
Step 1: Summing up the answers 275
Step 2: Evaluating the application answers 279
Step 3: Rank your applications 302
Step 4: Decide how many applications will advance to credit
checks and reference checks 302
Checking Applicants' Credit Reports 307
How to get a credit report 311
What's in a credit report? 314
The limits of credit reports 314
How to evaluate an applicant's credit report 316
Rerank your applications 327
Handle credit reports, criminal background reports, and
tenant-screening reports carefully 329
Checking Landlord, Employer, and Personal References 331
Contact past and current landlords 333
Contact current employer 344
Contact personal references 350
Reranking and rejecting applicants after talking with references 352
Checking Applicants' Criminal Backgrounds 355
Your qualified legal right to reject tenants with criminal backgrounds 357
How to avoid renting to people with dangerous criminal backgrounds 359
The basics of criminal background checks 361
The risks of running a criminal background check 362
The risks of not running a criminal background check 366
How to decide whether to do a criminal background check 367
Inform prospective tenants of your policy and get consent 368
How to do a Megan's Law search on your own 370
How to get a criminal background report 372
How to reject following a Megan's Law or criminal background check 374
How to Choose and Work With a Tenant-Screening Agency 377
How useful are tenant-screening services? 380
Obtain written consent from applicants 382
How to find a tenant-screening service (and how much they cost) 382
How to evaluate services provided by tenant-screening firms 384
How to use the screening report 390
Accepting and rejecting applicants based on screening reports 396
Choosing Your New Tenant 397
What to do when you have no qualified applicants 398
How to choose among qualified applicants 400
How to communicate an acceptance 403
Conditional acceptances and adverse action letters 405
How to deal with cosigners 410
Holding deposits 417
Signing the lease or rental agreement 419
How to Reject - What to Say, What to Write 425
Ten tips on how to reject 428
Adverse action letters 432
Rejections: How to say them, how to write them 440
Communicate postapplication rejections by mail or email 449
Using Forms 453
Editing RTFs 454
List of Forms 455
Choosing Good Tenants Makes Good Business Sense
What’s the law got to do with it?........................................................ 3
Is this book for you?......................................................................... 4
Ten ways to keep your rental business profitable............................. 5
Make a plan.................................................................................. 5
Deal with current tenants fairly and respectfully............................ 6
Comply with fair housing laws....................................................... 6
Be consistent................................................................................ 6
Maintain some flexibility, especially with tenants who
are legally disabled.................................................................... 7
Do thorough screening and rank your applicants.......................... 7
Be careful what you say................................................................ 8
Put it in writing and keep good records......................................... 9
Screen all occupants and roommates.......................................... 11
Get professional help or advice when you need it........................ 11
How to use the Landlord’s Forms Library....................................... 12
Why good record keeping is so important—and how to do it.......... 13
Make a new marketing folder every time you begin rerenting efforts 13
Create a file for applications you receive for this property.......... 13
Make a file for your chosen tenants............................................ 14
Tenants are your most valuable asset, and choosing good ones is the most important decision landlords make. A bad choice can result in damage and lost rent, but even when tenants leave without much fall-out, tenant turnover is expensive: It costs the average landlord two to three times the monthly rent every time tenants change. These costs include lost rental income, advertising and screening costs, and the value of your time to pull together and run the whole tenant selection show.
What separates the properties with stable tenants from those that have revolving residents? Simply put, both sides want the landlord–tenant relationship to continue. The tenants want to stay because the property meets their expectations and needs. And their landlords want to keep them because good tenants pay the rent, take reasonable care of the property, and are considerate neighbors. This book gives you the precise legal, financial, and practical information you need to find and rent to good tenants and keep your rental income steady and safe.
Good tenants do more for your bottom line than minimize your turnover rate. Your business will prosper in other ways, too:
You’ll avoid costly discrimination complaints and lawsuits. Discrimination claims are on the rise. You’ll need to call your lawyer to reply to even the most groundless claims—and you know how fast that meter runs.
You’ll save the time, money, and headaches of terminating a tenancy or filing an eviction lawsuit (or fighting a tenant-initiated lawsuit). Nothing can destroy a profitable year more quickly than an eviction lawsuit, even one that you ultimately win. You can narrow the chances of a lawsuit in two ways: by identifying lawsuit-prone and rule-breaking applicants and not renting to them, and by acting within the law yourself, so that you don’t invite trouble. Careful tenant selection (and scrupulous adherence to the law) are especially important when you’ve signed a long-term lease or have rent-controlled property.
Other tenants are more likely to stay put. If you bring a disruptive resident into a multiunit building, you won’t be the only one who suffers. Even if you take prompt action against the troublemaker, it will take you a while to get rid of him if he decides to dig in. In the meantime, your good tenants will leave—and your turnover rate will go up. And suppose you live on the rental property yourself? A poor tenant choice will mean that this person is your neighbor, too.
You’ll have a steady cash flow. For many landlords, an uninterrupted cash flow is essential to keep up with the mortgage and other operating costs. If you own one or two properties, you can’t afford to go without rental income for months at a time.
You’ll sleep better at night. It’s well known that stress can have negative consequences on your physical and mental health. If you can find and keep residents who don’t bother you or cause you worries, you may add years to your life.
What’s the law got to do with it?
While common sense and business moxie go a long way toward helping you identify and land good tenants, you can’t do it successfully without also knowing the law. Most landlords are aware that they must follow fair housing laws, but few understand that the law permeates every aspect of your tenant selection process. You could read every book on tenant selection on the market and not learn the legal details on issues covered in this book. Here are just a few examples of when the law enters the picture:
Showing the place. The law dictates how you deal with current residents when you want to show their unit (you must follow specific notice requirements) or do a pre-move-out inspection (your entry rights are limited).
Renting to people who “are not legal.” If you’re concerned about this, you need to know how to safely approach the issue when screening potential tenants.
Renting to ex-cons. Surprisingly, there are legal and practical risks in both running (and not running) a criminal background check, and you may face legal restrictions on using Megan’s Law databases.
Discrimination you didn’t intend. You may have the purest motives, but if your actions have the effect of discriminating, you’re in for trouble (for example, targeted advertising can backfire if you’re not careful).
Using a credit report. You can’t order a report to go after “skips” unless the original consent form covers this use.
Bidding wars for hot rentals. You need to know how to participate in a bidding war among prospective tenants.
Rejecting applicants. Depending on the circumstances, you can’t just say, “No,” or not call back. You must give rejected applicants legally required information—ditto for those you accept with conditions.
Responding to applicants with a disability. Federal law is very specific on how you discuss requests for changes in your policies or rental terms.
Are you surprised by the legal component of what you might have thought were strictly business decisions and actions? You’re not alone—the federal government spends millions of dollars catching (and thereby educating) clueless landlords. But you don’t have to be one of them.
Is this book for you?
This book is for all landlords who want to run a profitable business, protect their investment, and avoid legal hassles. The millions of landlords who own only a few rentals, and who choose to do most of the work themselves, will find this book especially useful. You’ll find advice on off-loading the tasks that are practically difficult to do as an individual (such as performing a multistate criminal background check), but most of the time, each aspect of tenant selection is explained so that you can implement it yourself. Landlords with large rental complexes and leasing agents, or property managers or management companies, will find also useful information in this book, such as how to say and document their decisions in ways that reflect their commitment to following the law.
This book is useful for landlords in all markets, cold or hot. When you’re competing for tenants in a cold market, you need to be as aggressive as possible—but you must not be so eager that you cut legal corners or make poor choices. The advice here will keep you safe, while helping you get your place rented as efficiently as possible. The legal edge will also benefit owners in moderate or hot markets, when lots of tenants are vying for your place: Ironically, when faced with a wide choice of applicants, landlords sometimes relax their legal guard and base their choices on factors that are irrelevant or risky.
Finally, two basic assumptions underlie all of the advice in this book:
You aren’t renting out a dump. You take care of your property and don’t let it get run-down, and you don’t tolerate problem tenants. If you conclude that you can’t afford basic physical and resident upkeep, or if the property and/or the neighborhood won’t support the rent you need, sell the property and invest in something else.
You’re willing to work hard. When you invest in stocks, you put the stock certificate in the drawer and monitor the market. That’s a lot easier than investing in rental property and holding open houses, checking references, and dealing with even the best of tenants. If you’re uncomfortable interacting with people and dealing with problems, hire a management company to perform every task or sell and invest in something else.
Renting to Section 8 Tenants
“Section 8” is a federally run and financed housing assistance program. Private landlords receive part of the rent from the tenant, but the local housing authority pays the rest. In most states, landlords can choose whether to participate in the program.
If you have property in a low-income area of town, you may find that most of your applicants are Section 8 renters, and you may need to accept them in order to stay in business. Participation in Section 8 has its drawbacks, however. Chapter 2 covers Section 8 in detail.
Ten ways to keep your rental business profitable
The blueprint for a profitable rental property business is fairly simple and consists of ten basic principles. This section lays out these principles and other chapters in this book show you how to implement these practices.
Make a plan
Before you escort a prospect through your rental—and even before writing your ad copy—you need a specific plan for getting your place rented. This book provides step-by-step advice on making and following your plan, which has five basic components:
Establish the basic terms of the deal. Decide on the rent, deposit, date available (build in time for repairs and refurbishing), pet policy, number of occupants, length of the rental term (month-to-month or a long-term lease).
Set basic requirements for the resident. Choose a minimum income, number of positive references from employers and current and past landlords, and your criteria for a healthy credit report. Decide whether you’ll do criminal background checks on all applicants who make it through earlier, more basic screening. Determine what policies are nonnegotiable and when you’re willing to be more flexible.
Plan your advertising strategy. What you’ll say in your ad depends heavily on your decisions on your rental terms and resident requirements. Now, where will you advertise? To craft a successful strategy, you need to figure out who will be your likely tenant (such as singles, a family, students), as well as the temperature of the market for rentals like yours.
Prepare for phone calls and showings by having details of your property at hand (such as the exact size of the bedrooms, neighborhood features) and facts about the competition. Your preparation should also include getting your place in shape before you show it to prospective tenants, and working around current tenants (if any).
Show the unit. You can do individual tours or hold an open house. This choice will depend heavily on your market and your personal preferences, and will affect how you advertise.
Implementing your plan will put your rental in front of the tenants who are likely to want to live there, and who are the kind of tenants you want. In a word, the plan efficiently moves you from a vacancy to an occupied property. You don’t have to spend a ton of money on advertising. You do need to spend some time on planning how and where you’ll launch your rental efforts.
Deal with current tenants fairly and respectfully
Although your mission is to find new tenants, you can’t do so without interacting with the set that’s still there. You must respect their privacy and follow state laws on showing their home to applicants. This will help you both avoid legal hassles with departing tenants, and show newcomers that you are an upright landlord who follows the law.
Comply with fair housing laws
You’ll operate at your peril if you don’t know and follow federal, state, and local fair housing laws, which should inform your words and deeds at every step of your selection process. Make choices (on where you advertise, what you say, how you screen, and how you choose tenants) based on sound business reasons, devoid of stereotypes or your personal feelings. Unless you can say, “Any reasonable businessperson in this situation would do the same thing,” you may be applying preferences or assumptions (about particular races, religions, ethnic origins, and the like) that could get you into legal trouble.
Consistently applying your screening and selection criteria is the hallmark of a lawsuit-proof business. Here’s why: Suppose you reject an applicant who has insufficient income, but accept another applicant who has a lower income. If the rejected applicant is a member of a protected group, he may claim that the rejection was due to his religion, ethnicity, or membership in another legally protected group. You’ll have an uphill fight to dispel this claim. The only way to win is to avoid, in the first place, inconsistent application of your tenant-screening and selection criteria and practices. This includes, for example, showing the unit to all who qualify, accepting applications from every interested applicant, and checking references and credit for all who meet your business-based standards.
Maintain some flexibility, especially with tenants who are legally disabled
Wouldn’t you know it—the law tells you to be consistent in one sentence, yet flexible in the next. Yes, it’s true—you must vary your criteria and standards, when necessary, for tenants and applicants who are considered legally disabled. That will happen when the variation is required in order for the person with a disability to live comfortably and safely at your property, and when the change will not be unduly burdensome for you. Chapter 2 explains these rules in detail.
Flexibility is also in order when dealing with first-time renters. There’s a lot of them out there—43% of all tenants are younger than 30 years old. (NMHC tabulations of 2012 Current Population Survey, Annual Social and Economic Supp., U.S. Census Bureau, updated October 2012.) Logically, these people would never be able to rent if the lack of a current or prior landlord reference automatically eliminates them. There’s nothing wrong with substituting equivalent criteria for first-timers (such as accepting nonlandlord references), as long as you apply the same approach to all first-time renters.
Do thorough screening and rank your applicants
Always take the time to do the checking necessary to assure yourself that this person is a good business risk. Nothing will be gained by hastily choosing a tenant. No matter how certain you are that your instincts will not let you down, or that you’ve learned enough after looking at a credit report (but before talking to references), you cannot afford to take a chance by renting to someone who has a skeleton in a closet that you didn’t open. First, it will cost you time, money, and endless aggravation to get that tenant out; and second, if you shortcut your process for this tenant but not for another whom you reject (and who happens to belong to a protected group), that disappointed tenant might have grounds for a fair housing claim.
If an applicant is really as solid as you think, you’ll lose nothing by completing our five-step screening process, which is depicted in the visual below. (Chapters 7 through 13 provide details on each step of the screening process.) You can reject an applicant at any stage, as long as your rejection is based on solid business reasons, and is consistently applied. Every time you complete a step, you’ll rank the acceptable applications in order of attractiveness. Often, you’ll need to rerank when you learn more at the next step.
Understand the Complications of Using a Tenant as Your Manager
Owners of multiunit buildings often hire tenant-managers (some state laws require that a manager live on site for larger properties), and many small property owners who live far away choose a tenant to handle day-to-day issues for them. When screening applicants for the tenant-manager position, understand that you are now an employer as well as a landlord. To avoid legal problems, you must follow employment law basics, understand the tax issues involved, and clarify the role of the tenant-manager. In particular, managers need to be as well-versed in fair housing law as you are, because their mistakes will land at your door.
Be careful what you say
Protecting your bottom line involves not only what you do (ordering a credit report for every top candidate who has made it past the application review, for example), but what you say along the way—from the first phone call (when tenants inquire about the rental and you do some prescreening) to the last (accepting or rejecting tenants). Ill-chosen words can precipitate a fair housing lawsuit, commit you to promises that you never intended, or sow confusion leading to problems.
Be sure you know how to get the information you need—but avoid fair housing shoals along the way. For example, it’s fine to ask how many people will be living in the rental unit to make sure they meet your reasonable occupancy limit, but asking about the ages and sex of the occupants, and whether they are married, may be an invitation to a lawsuit.
Though it’s tempting, don’t puff or overhype your rental. It’s fine to be enthusiastic and extol the benefits of your property, and it’s necessary in competitive markets. But promising things that are only remote possibilities (such as that a parking space will open up soon) may lead to trouble. The bottom line: Deliver what you promise.
Finally, clearly explain to tenants your key terms, policies, and expectations, and do so early in the screening process. You’ll avoid wasting time on inappropriate tenants or tenants who want something else (such as a property that allows pets).
Throughout this book, you’ll see scripts with typical applicant questions that landlords encounter along the renting way. Matched to the question is a suggested way of answering—one that’s accurate and legally safe—and an example of how not to say it, along with an explanation of why. On the companion page, you’ll find audio clips of exchanges between landlords and applicants illustrating similar common conversations.
Put it in writing and keep good records
There’s no way you could get through this list, written by a lawyer, without encountering that supremely lawyer-like admonition, “Get it in writing!” Why is this important? A paper trail accomplishes two desired ends:
First, by using the worksheets, letters, and checklists in this book, you’ll be steered toward the legally safe path. If you follow the directions, it’s unlikely that you’ll stray. For example, a letter informing an applicant that he’s been rejected due to information on a credit report needs to include specific legal information—and should avoid certain topics. By using the adverse action letter included on the book’s companion page, and entering only the information relevant to the applicant, you’re covered.
Second, written documents are hard evidence that you followed the law. If you’re ever challenged, you won’t need to rely on “he said, I said” evidence. Instead, your filing cabinet full of completed letters and notes of conversations will be admissible evidence in your favor. In particular, the Tenant Information Sheet, a master document for each applicant where you record relevant information you find along the screening path, will show your methodical process and business like conclusions. Even the files for applicants who dropped out will be helpful evidence, for they will establish that you regularly do business in a legally compliant way.
The chapters in this book that involve step-by-step decision making, and communications with applicants and tenants, have corresponding forms that help you accomplish the tasks. At the start of each chapter, you’ll see a “Landlord’s Forms Library,” which lists them and gives a brief description of each along with record-keeping advice.
Screen all occupants and roommates
When you’re renting a unit to more than one tenant, whether it’s a husband and wife or a group of unrelated roommates, you may be tempted to screen only one (or two) of the applicants. Or, when an existing tenant wants to bring in a replacement roommate or add a roommate, you may skip the screening, counting on the steadiness of your existing tenant. Failing to thoroughly screen everyone who will live in your rental is a mistake for two reasons:
First, you’re potentially depriving yourself of a source of the rent. Any person who lives on the property can be expected to pay the full rent (how the roommates share the rent is up to them, not you). Practically speaking, you won’t often insist that each roommate be able to shoulder the entire rent, since people live together precisely in order to share expenses. But if you don’t know anything about a tenant’s finances, you’re limiting yourself to the residents whom you have screened. Suppose the screened resident falls on hard times, and his unscreened roommate is unemployed and broke? You have no choice but to terminate the tenancy of both of them. Far better to determine at the outset that the second resident is at least as solvent as the original tenant.
Second, an unscreened tenant imperils the tenancy in other matters besides the rent. If the unscreened tenant causes problems and leaves, or is asked to leave by you, that will be the end of the tenancy for everyone (unless existing tenants can cover the rent or come up with a suitable replacement). Now you’ve got another vacancy. No matter how earnestly your existing tenants vouch for the newcomer, nothing will be lost by checking him or her out.
Top Ten Good-Tenant Criteria
Your rental plan involves developing and applying standards that you can legally and safely use to weed out poor risks. Here’s a quick overview of top tenant-screening and selection criteria; you’ll find all the details in later chapters, including advice on when it makes business and legal sense to be flexible on some of these issues:
Ability to meet your basic rental terms, such as number of occupants, rental term, and pet policy
Sufficient income to pay the rent (the industry standard is a monthly gross income that is triple the monthly rent)
Satisfactory credit record, in terms of the applicant’s debt level and bill-paying history
Credit score that reflects a strong likelihood that this applicant will pay the rent on time every month
Positive references from other landlords (attesting to the
applicant’s history of paying rent on time and respect for property and other tenants)
Positive reference from the current employer, describing the applicant’s ability to get along with coworkers and supervisors
Clean rental record (no recent terminations or evictions)
History of limited involvement with lawsuits (no history of initiating multiple, groundless lawsuits)
Clean criminal record or, at least, one that doesn’t lead you to conclude that the applicant is a direct and current threat to persons or property, and
Complete and accurate rental application, including addresses of past residences and answers that are corroborated by your independent screening.
Get professional help or advice when you need it
Though there’s a lot you can do yourself, it’s the wise person who knows when to call for reinforcements. In particular, you may want the advice of a local landlords’ association for help on issues that have practical solutions known by experienced landlords (if you’ve decided to use a tenant-screening firm, an association may know which outfits deliver the most accurate information, for instance). You may want to consult with a local attorney who’s well versed in landlord-tenant law if you’re unclear on how to implement a particular state law or local ordinance. And, certainly, if you’re sued, you’ll want to engage an attorney for all but the most minor small claims court matters.
How to use the Landlord’s Forms Library
This book includes over 40 forms—worksheets, letters, and checklists—designed to help you organize your thoughts and actions and record your conclusions (or send communications) in a legally safe manner. Your Rental Kit, for example, includes the forms that you’ll give to applicants who want to fill out your rental application. You’ll find a handy list at the start of each chapter, with filled-in samples of each form in the text and copies on this book’s companion page, available after purchase of this product.
Each form is in RTF format, which you can edit and fill in using the word processor on your computer. You can also save each completed form to your computer. The RTF file format allows you to adapt the forms to your own situation. You can add or delete language, adjust margins, and print on your own letterhead.
A few tips on using the forms:
Always review the sample form and instructions in the text.
You can edit the forms according to your specific situation, but if you make major substantive changes, particularly to letters sent to applicants and tenants, it’s a good idea to have your lawyer review them.
When modifying the forms, delete bracketed and italicized prompts next to blank lines (such as “[tenant]” at the beginning of a letter), and just type in the information that’s called for.
If you add a lot of material, you will probably have to work with the margins and layout to make the form fit nicely on your sheet.
Be sure to sign and date every letter, and keep copies of each form for your records. (The icon at the end of each Landlord’s Forms Library tells you how.) If you communicate via email, consider printing a hard copy or, if you’re averse to using paper, be sure that your computer is backed up regularly.
Finally, your careful documentation of rental decisions and communications needs to be organized and stored. Some documents you’ll hope never to need to look at again (like letters to rejected applicants), but others will be useful in the future when it’s time to rerent. For example, having asked prospects to note on their applications how they heard about your vacancy, you’ll learn what advertising methods reached the most people. When you look at the pool of qualified applicants, you’ll learn further which methods reached the most qualified applicants. This information will guide you the next time this unit becomes vacant—and you’ll want to have it at your fingertips. Set up a record-keeping system for filing your papers like that described in the next section, or devise one that works for you.
Why good record keeping is so important—and how to do it
Organize the paperwork generated by your renting efforts by property. For example, if you own one duplex, you’ll have two main sets of files, perhaps separated into filing drawers (one for each rental). Follow this sequence every time you rerent.
Make a new marketing folder every time you begin rerenting efforts
For example, suppose one half of your duplex at 123A First Street becomes vacant and you begin your renting efforts in January 20xx. In your cabinet drawer for that property, you’ll start a new hanging file, “January 20xx Tenant Search.” You’ll put the worksheets, ad copy, and all the other forms you use from this book in that file (using folders as needed) as you advertise and show that rental.
Create a file for applications you receive for this property
Continuing the above example, label another hanging file “January 20xx Applications.” Here, for every applicant, you’ll paper-clip together the Tenant Information Sheet (a master document where you record contact information for the applicant and make notes of conversations, meetings, and results of each screening step), the rental application, the credit report and your review, and any other papers associated with evaluating this prospect. The final paper will be your acceptance (or conditional acceptance) letter, or a rejection letter (for those to whom you must send written rejections). If you find that this file is getting too big (perhaps you’re evaluating several prospects), you can make folders for each, as shown in the illustration below (stagger the file tabs so that when you look at the lineup of files, it’s clear that all of them relate to the same renting effort). If you’re considering an application from several proposed roommates, clip each roommate’s rental application, credit report, and so on together, and put all of these bundles together in one file (labeled “John Anderson et al.” or something similar).
Make a file for your chosen tenants
Label this with the names of the tenants and when their tenancy began, such as, “John and Mary Jones, March 20xx.” You can move the Jones application materials into this file, so that information they supplied on the Tenant Information Sheet (such as an emergency contact) is easily accessible. Following the application documents, you’ll add the lease or rental agreement, a checklist documenting the condition of the property prior to their moving in, and so on. This file will eventually include any letters or notices you’ve sent each other, amendments to the rental document, and requests for repairs, and will end with the end-of-tenancy walk-through that you should do in order to fairly assess any damage or excessive wear and tear (hopefully, it will not end with your termination notice!).
How long should you keep these files? The Landlord’s Forms Library at the start of each chapter recommends how long to keep different forms. To defend against a fair housing claim, you’ll need them for three years at least, and it’s wise to keep them longer. However, you’ll need to follow special procedures when it comes to keeping credit reports, as explained in Chapter 11.
Worksheets and Letters May Affect Current Tenants, Too
Some of the worksheets and forms in this book will be relevant to your current tenants, too. For example, you’ll want to inspect occupied units to determine how much work needs to be done before the next batch of tenants moves in—this will affect your start date for the new tenancy. Your inspection request should go into the file for these tenants, as well as any letters announcing a tenant referral program, and your pre- and post-open-house checklist, which will document the condition of an occupied unit before and after a property showing. When forms, checklists, and letters affect current tenants, be sure to make copies for their files, as well as for the property’s marketing file and applicants’ files.
Every Landlord’s Legal Guide and Other Nolo Resources
Choosing the right tenant is the first step toward a profitable business. Now, you have to keep things moving smoothly and legally. Check out these Nolo products to help you along the way:
Every Landlord’s Legal Guide, a 50-state book with forms available online, provides all the information and forms you need, from the lease or rental agreement to the documents you’ll use at the end of the tenancy.
Every Landlord’s Tax Deduction Guide is an indispensable guide to understanding tax rules that apply to landlords.
California landlords will appreciate The California Landlord’s Law Book: Rights & Responsibilities and The California Landlord’s Law Book: Evictions, which provide detailed information and forms for California landlords.
The Nolo website, www.nolo.com, has lots of free information of interest to landlords. On the home page, choose Property & Money, then Landlords & Property Management.
How to Find the Law on Your Own
You may want to read the laws referred to in this book yourself, or you may need to look at local laws, which aren’t reproduced here. Here’s how to do it.
Federal and state laws. Go to www.nolo.com/legal-research. You’ll see several articles that will orient you to the world of legal research, including tips on how to read a statute and how to make sure it’s up to date. To access state laws, click the State Laws link at the top of the page, and choose your state. You’ll go to a page with state-specific information, including security deposit limits. You’ll also see a link to the site maintained by your state, with search boxes allowing you to enter the citation of the law you want to read. Clicking “Federal Laws” takes you to federal laws. The Nolo website also has a chart with key landlord-tenant state laws.
Local law. State and Local Government on the Net (www.statelocal government.net) is a great site for finding local law. The Municipal Code Corporation (www.municode.com) is also helpful. You may also be able to go directly to your city or county website. Most use one of the following formats:
County: www.co.<county name>.<state postal code>.us, as in: www.co.marin.ca.us, or
City: www.ci.<city name>.<state postal code>.us, as in: www.ci.berkeley.ca.us.
Once you’re at the local website, look for links such as city codes, local ordinances, and municipal codes. You’ll usually be able to search by keyword or by browsing a table of contents.