Tenant Screening

Background Check

Background check reports are simple to obtain. You should run a background check on all prospective renters. The two things you are looking for is a good credit history and a lack of criminal history. A background check report usually includes credit history, criminal background, and an eviction report. Some will also include a credit score. You will need permission from your prospective tenant to perform a background check.

Verify Renter's Income

Verifying income is not difficult. You can request an applicant's pay stubs, copies of their W2s, bank statements and/or a tax return transcript Form. You can also request a Salary Verification Letter from their employer. If the person is self-employed or a contract worker, which is increasingly common these days, you can review a few months of their bank statements and/or tax returns to estimate their average income. Keep in mind that W2s, tax information and social security numbers are personal, and that information should be protected as best you can.

To be Upfront about Screening

It is up to you how much information you want to share about what you are looking for in a background check. If you have a certain credit score in mind, it may help to share that information. If the prospective tenants already know they have bad credit, it will save everyone time if they simply choose not to apply. In terms of criminal backgrounds, you may benefit from consulting with your local housing authority to make sure you do not discriminate against a protected group. It is important to understand the housing discrimination laws that apply to your situation before you start looking for tenants. If you have doubts or questions, ask a lawyer.

Checking Tenant's Social Media Profiles

If Tenant's profiles are public, you can look at them, but you may not be able to use the information you see to discriminate. It is extremely difficult to use what you learn on social media in a non-discriminatory way. Maybe you'll see that you think they drink too much or that they belong to a political group you do not agree with; these two things might not even be true and may not be reasons that you can legally reject an applicant. You must not violate fair housing laws. It is best to judge your tenant on legitimate reasons such as credit history or eviction history.

Denying a Rental Applicant

You can reject an applicant for a variety of reasons including bad credit, previous evictions, non-verifiable income, and more. Before you decide against offering a Lease Agreement to a prospective tenant, make sure you are deciding against them as renters for legitimate and legal reasons. If the applicant is denied due to the information in their credit report, you generally must provide an Adverse Action Notice to them. An Adverse Action Notice includes the reasons they were denied, the credit agency used to obtain the information, and how to contact that credit reporting agency. If you are denying them because of their criminal background, you must provide them with a denial letter and instructions on how they can obtain a copy of their criminal background report. Keep the application and associated reports for your records in case your decision is challenged. If you have questions about how to communicate a denial, ask a lawyer.

Landlords Avoid Costly Fair Housing Complaints
Best Practices for Getting a Rental Filled
Lease Terms and Policies That Lead to Fewer Evictions
Tenant Screening Best Practices for Landlords During the Pandemic
Rental Referral Letters and References
Tenant Screening Questions: Background Check Details to Cover
Tips for Checking a Tenant's Credit and Background
Proof of Income: How to Verify Tenant Employment and Wages
Legal Reasons to Deny a Rental Application
How Much Can a Landlord Charge for a Security Deposit?
Strategies for Finding New Tenants During the Holiday Season
How Work-From-Home Tenants Impact Landlord Expenses

Residential Leases

Types of Properties eligible for Residential Lease

Residential Leases are suitable for properties that are legal to rent as housing, such as houses, apartments, mobile homes, condos, townhomes, duplexes, basement apartments, or a single room in a home or cabin. To be considered legal housing in most areas, the property must be safe, structurally sound, have safe wiring, meet HUD lead-based paint requirements, have adequate ventilated sleeping areas, have functional bathrooms, and more. If you are not sure that your property is legal to rent in your area, contact the local housing authority to learn more about what is considered habitable.

Can we Rent Someone with Marginal Credit

If you are renting property in an area where it is difficult to find renters, you may benefit from considering tenants with less-than-perfect credit histories. If your rental is in a high-demand area, you can afford to be choosier. While it may not be wise to rent to someone with bad credit and a past eviction, you may want to consider an applicant with marginal credit. Details that may be okay to overlook include: No credit history with a good income; long-term debts, such as student loans or medical bills, if they are in good standing; a new job, if the rest of their job history is consistent; or a person who has a good rental history but can't pay the whole deposit at once.

Can we Limit number of People Living in a Rental

You may limit how many people can live in a unit as long as it is not considered discriminatory towards families. In most areas, the guideline is two people per bedroom. Some housing agencies recommend a certain number of square feet per person rather than by bedroom. Some housing codes also define what may be considered a bedroom. Ask a lawyer.

Allowing Service Dogs even if we have a NO Pets Policy

Fair Housing Laws may require you to allow service animals. Service animals are not considered "pets" so they are not restricted by standard pet policies. You can ask for proof that the animal is "prescribed" by a medical professional or by a mental health care provider for emotional support animals. You cannot, of course, ask about the tenant's disability or diagnosis specifically. You also cannot charge extra pet rent or a pet deposit like you might for a pet. You may not have to provide accommodations if you have few rental units, are renting a single home without a broker, or are renting a hotel room. You'll want to make sure you comply with the laws. Ask a lawyer.

Can we allow Smoking on the Property

The first thing to do is to find out exactly what the marijuana laws are in your state. Similar to prohibiting cigarette smoking and vaping, you can also restrict tenants from smoking marijuana by including those restrictions in the original lease. If you do allow smoking, you may want to include information in the lease about designated smoking areas, so that the smoke doesn't bother other tenants. Before you make any decisions, you may also want to contact your insurance company to see what types of smoking-related damage they might cover.

Early Termination of Lease Contract!

The lease usually will specify what happens in the event of an early termination. You might have to pay an early termination fee. Certain states require landlords to attempt to find a replacement tenant as quickly as they can, which is referred to as "mitigation." In those states, the landlord is only allowed to recover the rent for the period of time before they are able to lease the property to a new tenant.

If you have further questions about Apartment Leases, an experienced attorney can help.

Non-residential and Commercial Leases

Advantages of Long Term Commercial Lease

Unlike residential leases that are often only for a year, many non-residential leases last numerous years. If you can sign a responsible business tenant for many years, you will benefit from long-term income. If the business is a restaurant or retail space, the success of the business may partly rely on location, which may make them want to lease longer. If you've had a difficult time leasing the space long-term, a lower-priced rental may be more beneficial than a high-priced, short-term lease in the long run.

Here are a few more advantages of long-term commercial leases:

Property improvements do not need to be made as often
Tenant may agree to pay for some of the improvements
Tenant may agree to pay for property taxes, insurance and utilities
If you are applying for financing, long-term lease agreements are favorable
You may be able to increase rent overtime as the business grows

Deposit for Non-Residential Properties

Legal limits on security deposits vary by state and range from the equivalent of one month's rent to an unlimited amount. If you are unsure about what laws apply to your situation, ask a lawyer.

Allowing Sublease to the Commercial Tenants

In some instances, a commercial sublease may be a smart move. For example, if you have a tenant whose business is not doing well, you may benefit from allowing them to sublet the property to another business. In this arrangement, your original tenant would still be responsible for the rent and for the original terms of the lease, but you may increase your chance of collecting rent from a more profitable business. You could also save money on the legal fees involved with a formal eviction if the failing company cannot pay rent. Another situation that may be beneficial is if a strategic partner wants to share the space with your tenant with the goal of improving revenues for both businesses. For example, a coffee shop and a bakery may want to rent your space together to help each other's businesses. You'll have to decide what makes financial sense for you.

Paying for Building Alterations

Some tenants may want to alter the leased space. How much you decide to invest in the updates is often tied to the nature of the renovations and how long the lease lasts. The longer the lease, the more likely you'll be motivated to help with the building remodel. If you decide to help your new tenants update the building, you can help them in two ways. You can help them outright by paying for the remodel yourself, or you can take a few months off the rent to help your tenants pay for the update. For a five-year lease, a landlord might take off up to six months of the rent to help with renovations. In some cases, you may want to add a clause in the lease that dictates how you want the property returned to you.

Property Management

Property Managing Companies

If you have multiple properties or are often away from your properties, you may benefit from hiring a property manager or management company. A property management company will often charge you roughly five to ten percent of the rent collected. They will manage routine tasks, such as screening tenants, scheduling maintenance, and collecting rent. If you can charge enough rent to cover the costs, it may be well worth the expense to hire a professional to manage your properties.

Cost & Impact of Collecting Rent Online

Many tenants enjoy the convenience of being able to pay their rent online or using an app. Using a service, your tenants can pay rent by credit or debit card. They can set up rent to be paid automatically and some platforms even allow tenants to pay by phone. Tenants are more likely to pay rent on time if it is convenient. A service will generally collect a small fee per transaction. It may be a flat-fee or a percent of the rent. You can choose to cover the cost or pass the cost along to your tenants.

Collecting Rent in Person is a Good Practice

The main advantage of collecting rent in person is that it gives you the opportunity to routinely see your property. It may not be convenient, but during your monthly visits, you can survey property damage, peruse the parking lot and landscape, spot disallowed pets, and more. It also gives your tenants time to discuss issues with you in person. If you have numerous tenants and properties to manage, it may not be practical to visit every month. In that case, you may prefer to hire a property manager or set up online payment services instead.

How to Hire a Property Manager

You need a reliable property manager that you can trust to manage your properties well. A bad property manager could cause you some serious problems. Hiring the right manager is critical. There are many steps to finding the right manager for your properties, but at the minimum, you'll want to:

Ask other owners who they have worked with and who they'd recommend.
Perform a background check on the prospective property managers just as you would a tenant.
Put together a list of interview questions.
Evaluate their communications skills.
Ask them if they charge by the rent that could be collected or actual rent collected. Ask about additional fees.
Ask them what technologies they use to help them perform their duties.
Ask them how many properties they manage, how many they can manage, and whether they have help available when needed.

If you are hiring an individual, such as a relative or one of your trusted tenants, you might consider using an Employment Application to screen prospective hires, and you'll want to formally outline the details of the role in a Property Manager Agreement. As with any other job interview, you should consider putting together a comprehensive list of questions you want to ask them before hiring.

Forming Business Entity to Manage Multiple Properties

There are many advantages to incorporating as a landlord regardless of how many properties you own. The first advantage to forming a business entity such as an LLC is that it protects your personal assets. If you should be sued, in most cases, your personal assets, such as your home, are protected. Some landlords even choose to form an entity per property, so that lawsuits may be isolated to the property in question. Other advantages include that it's easier to keep personal and business funds separated and the owners of the business can more easily be anonymous. There may or may not be tax advantages for you. If you are considering incorporating, talk to a lawyer about what option is right for you.

Expenses that can Landlord can deduct from Deposit

Generally, you cannot use deposit funds for what might be considered standard "wear and tear" damage, such as worn carpet, faded paint, or sun faded window coverings. If you do make repairs that you want to claim as valid deposit deductions make sure to keep all receipts in case you need to settle in court. You may also want to document damages with pictures (images from when the tenants moved in and after they move out if possible).

You can usually deduct for extensive damage or hygiene issues, such as:

Filth and neglect. Excessively dirty bathrooms and kitchens, mold growth from neglect, moldy refrigerators or rotten food, and flea infestations.
Damage. Damage might include broken doors or windows, large holes in the walls, or broken tiles.
Broken inclusions. Broken appliances from misuse, oily parking spots, damaged storage units, or damage to included furniture.

Changing Lease Terms

Notification to Renters regarding Change in Terms of the Lease

To change an existing lease, you'll need to make a Lease Amendment document and usually notify the tenant of the change at least 30 days in advance. The amendment should be saved along with the original lease for your records. The most common lease changes include adding a pet provision or adding a roommate. If you need to make major lease changes, it may be best to wait until the end of the term of the lease. If you have questions about changing a lease, ask a lawyer.

Sublease of your Property

While many landlords choose not to allow subleases, you may be asked by your tenants if they can sublet. They may be traveling or moving away for a bit, but want to keep their rental, or perhaps their job is requiring that they relocate and they need someone to finish the terms of their lease. Subletting may be beneficial to you since the new tenant can most often move in without you having to do the regular move-in/ move-out maintenance. Plus, it keeps the unit occupied and rent money coming in. As with any prospective tenant, you should consider running a background check, verifying their income, and everything else you would do to approve a new tenant. If you decide that you will allow subletting, you'll need to make a Sublease Agreement and attach that to the original lease. The original tenant and sublessee will both be responsible for the original terms of the lease and if the new tenant doesn't pay rent, the original signer will still be responsible.

Rise In Rent

In most cases, you cannot raise rent until the end of the lease. In rent-controlled buildings, there are additional limitations that you'll need to comply with. You will also need to give adequate notice. If a tenant's lease is soon to expire, you generally need to let them know a month in advance and communicate whether or not you plan to offer them a new lease. If you are planning to raise the rent, this is can be a good time to tell them. That way, they have 30 days to find a new rental if they don't want to sign a new lease. In some areas, you may need to notify your tenants of rent changes even more than 30 days in advance.Unless you are leasing units in a rent-controlled building, you are often not limited on how much you can raise the rent. With a bit of market research, you should be able to decide what fair rent would be in that neighborhood. Sometimes it even makes more sense to not raise the rent if it would cause expensive vacancies. You'll have to figure out what makes financial sense for your situation. Landlord-tenant laws vary by locality, so be sure to ask a lawyer to understand what rules apply to you.

Eviction

Notice To Vacate

It depends on the local housing laws, but often you must give three to ten days notice. If the tenant does not pay rent before the end of the term, you can file a complaint with the courts. To start the process, you need to deliver an Eviction Notice. The notice will state how much the tenant owes, when they need to pay it by, and what happens if they do not pay.

Need of Lawyer to Evict a Tenant

In some situations, you may need a lawyer to legally evict a tenant. Whether you need to hire a lawyer or not is often dependent on how many units you manage. Even if you are not required by law to hire a lawyer for an eviction, it can be helpful. A lawyer familiar with local landlord-tenant laws can help make sure you do not violate any local or federal housing laws during the eviction process that may make you lose the case.

Can a Tenant fight an Eviction

The eviction process has two sides, the landlord and the tenant. Once a complaint is filed, the tenant has the right to respond. If the tenant simply owes rent and pays everything due, that may stop the eviction process. If the tenant has asked for repairs to be done and they were not done, that may give the tenant cause to contest an eviction. If the eviction process is not handled correctly, that is another reason a tenant can fight the eviction. In order to win your case as a landlord, you need to follow all eviction and housing laws. Working with a lawyer can help to make sure you follow the legal process required.

Timeline for Eviction

In most cases, less than a month. If your tenants do not comply to the notice to vacate, you can file a complaint with the courts and receive a court date. If you win your case, the tenant will have to move within a few days of the decision. Keep in mind that the process may take longer in rent-controlled areas. Some states may impose other limitations. However, in most areas, the process is rather quick and if the tenant doesn't vacate, local law enforcement officers may escort them off the property. If the eviction is for something other than not paying rent, it may take a bit longer and you may be required to give longer notice. If you have more questions about the eviction process, ask a lawyer.

What to do with belongings left in the Rental Property?

Often tenants do not have the time or resources to move their possessions before the "set out" date. Every area has different rules; however, in most areas, you can simply move their items to a storage facility and charge the tenants for the cost of storage. Some local laws require you to arrive at the set out with movers, boxes, and a locksmith to accommodate the process. Once you move the items, you can let the tenant know how they can recover their belongings. You might also give them a compliance date, which is often 30 or 60 days. If they do not recover their items, you can sell their things and apply the raised amount to their debt. You may also be allowed to donate low-priced items to charity. In some areas, you can simply place the left items on the curb, but it is not recommended even if it is technically legal. Their items may include sensitive documents or medications and their belongings will most likely be rifled through. In some areas, if their items are damaged, you may be held liable. If you have concerns, ask a lawyer about the best way to handle tenant property after an eviction.