We have some breaking news on the Portland real estate market. There are some new laws that went into effect just recently, on March 1, 2020. These laws are included in the Fair Access in Renting, or F.A.I.R. Ordinance. They cover resident screening and advertising, as well as security deposit management.
Today, we’re elaborating on some new things you need to do as a landlord when you’re screening your potential residents.
The recent F.A.I.R. Act was just passed on February 1, and is now being implemented with fewer than 20 business days for rental property owners to adjust. It’s complex, and it’s a real burden to place on owners and landlords. We aren’t attorneys at Mynd, but we are experts in Portland property management, so we want to share what we know and offer some pointers for how to avoid falling out of compliance with these new laws.
Screening Options in Portland
Portland rental property owners now have two options when it comes to screening applicants.
There’s a low barrier option, which has requirements that aren’t very strict and are more open to residents of all financial and criminal backgrounds.
There is also an option for you to set up your own screening criteria if you choose not to use the low barrier option. Even when you screen your own criteria, however, you have to comply with some regulations and barriers put into place by the City of Portland.
In some cases, landlords will have to allow for a 72-hour waiting period before approving an application to identify the unit as accessible for people with disabilities. You’ll now need to allow your prospective residents to disclose whether they have a disability. In some circumstances, applicants with a disability will have an opportunity to rent your unit before others can even apply. Their applications must move to the front of the stack, and they’re entitled to be screened before other residents.
That’s a huge delay for property owners, and it may drag out the leasing period, leaving you with extra days where your property is not occupied and rent is not coming in.
Rent to Income Ratio Barriers and Restrictions
Another part of the F.A.I.R. Act is a restriction on what you can require for a rent to income ratio. We’ll talk about this further in another blog, but you need to know that you cannot arbitrarily impose your own requirements on how much income an applicant earns before being approved for your property.
Depending on whether you’re following the low barrier requirements or your own standards for approval, you’ll only be able to look for income that’s equal to two or two-and-a-half times the monthly rent. You are no longer allowed to deny residents if they don’t meet your higher income standards. If you were previously only renting to individuals who earned three times the monthly rent, you cannot do that anymore.
This is a heavy burden to put on property owners and it really increases your risk when you’re renting out your property. It may be more difficult to find a truly qualified tenant with these laws in place. You may also face a longer screening and leasing process in general.
Applicants Can Appeal Denied Applications
But wait, there’s more.
In addition to all of these new requirements, there is also an appeals process that’s been put into place. If you have an applicant who wants to rent your home but doesn’t meet the criteria and gets denied, that applicant can appeal your denial. This process can take 30 days. If, within that timeframe, you have rented the original property to someone else and the applicant wins the appeal, you have to allow them to rent another unit for which they will qualify. Applicants who can submit documentation that refutes your reasons for denial will ultimately be granted permission to move into one of your units.
As a landlord, this creates a lot of extra work and requires a lot of extra time on the screening process. It could slow down your entire approval process for other applicants.
Penalties for Violating F.A.I.R.
A lot of Portland landlords are going to be worried about making a mistake. If you’re wondering what will happen if you do make an error, your question is valid. These rules are so new that we aren’t sure what the ultimate penalty will be. But, you can probably count on having to pay two times the security deposit at least. Then, there may be additional punitive damages that result in a $250 charge for each error along the way. Potentially, you could be responsible for the applicant’s legal costs as well.
So, depending on the number of errors you make and the types of mistakes they happen to be, you could be looking at penalties that reach thousands of dollars.
As we’ve said, this is a new law, and the laws here are always changing. Surely there will be revisions, and we can expect court battles moving forward.
If this does nothing else, it should show you the importance of hiring experts. Treat your property like a business and protect that business. If you’re self-managing, make sure you understand these laws and you’re prepared to follow them.
We’ll be talking about this more in the future. Until then, contact us at Mynd Property Management if you have any questions or if you’re a Portland rental property owner who needs help coming into compliance with this law.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.