Landlord Tenant Reference Rules
As a landlord, should you provide tenant references for your past tenants?
tI's the one call that every property manager receives and makes. Sometimes with a little, or a lot of, dread: the reference call.
It's a chance to check out a potential tenant from the businesses that know them best: their previous landlords. But giving and getting references is a tricky undertaking, and not just for property managers.
Most rental agreements include a section where prospective tenants list references. That can consist of their employers, friends, as well as previous landlords. And typically, there is a waiver allowing the property manager to call these references. But it does get tricky.
Here's some guidance.
Let's start with the facts first and then get into that tricky stuff. Here is what's stated, for example, on the standard rental application from the Apartment Owners Association of California Apartment: "Applicant represents that all information given on this application is true and correct. Applicant hereby authorizes verification of all references and facts, including but not limited to current and previous landlords ..."
So, property managers can make the call. But what about getting the call? What should you say when a rental agent calls you and asks about a tenant who lived in your dwelling unit 18 months ago? It's useful, we think necessary, to think about the difference between a rental reference and employment references.
Many employers no longer give references, instead just opting to confirm that someone did work for them during a specific period.The reason: fear of being sued if they somehow say the wrong thing. But work is often subjective, making the good or bad performance more open to interpretation.
Make Your Records Great
Tenancy is more black and white - so keep it that way. Stick to the facts. And make sure you can document what you say. That's why keeping good records - or having a trusted partner do it - is so important. If the tenants paid their rent on time every month, your records should say that. If they trashed the unit and forfeited the deposit, this is a good reminder of the need to take pictures and log them accordingly.
Giving a false bad reference - or one that isn't backed up properly - opens the gate for a potential lawsuit based on slander. Cases are few, but they happen. Don't think they can't happen to you. Similarly, giving a false positive reference – in the hopes that a problem tenant becomes some other property manager's problem – is also grounds for litigation based on misrepresentation.
Again, this litigation is rare, but why take the risk?
Legally, landlords are under no obligation to give references. But if you think about all of the property managers in your area as being part of a community, there is a shared commitment to helping each other out.
An easy way to do that - to be part of the virtuous circle - is to give references when asked. Again, stick to what you know - and what is written down and can be proved if it's called into question. The reality is that the next day it could be you asking for a reference, and you want the same courtesy -- and information -- from the property manager on the other end of the phone.
Other Screening Considerations
A landlord reference isn’t the only tool in your screening arsenal.
Writing a Great Rental Property Listing
Writing a great rental listing will help prospective tenants decide if they should apply or not. Make sure to include plenty of specifics from your rental agreement.
- Monthly rent
- Lease term
- Rental period
- Whether utilities are included
- Pet Policy
- Smoking policy
- Number of bedrooms
- Number of bathrooms
- Type of unit
- Stand-out features (this can be the neighborhood, something about the unit, etc.)
- Get proof of income to confirm minimum monthly income. The 30% rule is the industry standard.,This means that 30% of your tenant’s gross monthly income should go toward rent. You could also use a ratio multiplier to confirm that your tenant’s gross monthly income is three times the rent. That way, you reduce the likelihood of a late or missed rent payment.
- Verify your tenant’s identity by asking for a valid, government-issued photo ID.
- Use a third-party credit agency to run a credit check, background check, and eviction check.
- If your potential tenant is denied, then send an Adverse Action notice within 24-hours. Legally, you must provide the rejected applicant with the credit agency’s contact info (name, phone number, and address). You have to let the applicant know why they were denied. They also have the right to a copy of the credit report in question.
- If the tenant is deemed “approved with conditions,” then you can rent the property with an additional security deposit. Like the denial, your tenant is entitled to the credit agency’s contact info, an explanation, and a copy of the report. An Application Approval Notice must also be sent to all applicants.
- Once your tenant is approved, let them know how to make a security deposit. Mynd encourages prospective tenants to act quickly by letting them know that whoever pays their deposit first takes the property off the market. Most property management companies keep approved applications active for 30 days.
- Verify the move-in date, the length of the lease, and all fees.
- If you use an online rental payment portal, send your approved applicants instructions on signing their lease agreement within 24 hours of the Approval Notice. A rental payment app is a great way to reduce late rent payments.
Go Over the Lease Agreement
Going over your lease agreement with your tenant is also a form of screening. This way, you also avoid surprising liabilities.
- Pet Policies: Discuss the pet policy with your prospective tenant. Remember that emotional support animals and service animals aren’t covered by pet policies since they’re working animals rather than pets.
- Criminal Activity: Make it clear that illicit activity is grounds for early lease termination.
- Bedbugs: Show your tenant a certificate that their rental unit is bedbug-free.
- Windows and Screens: Warn your tenants about the dangers of open windows if they have children, and ask your tenants if they want screens. If they want screens, install them ASAP.
- Secondhand Smoke: Smoking is a fire hazard, can leave odors, and stain walls. Smoking can also be a nuisance and grounds for legal action if a tenant has respiratory issues.
- Slips and Falls: Make sure your rental property is ADA compliant. That way, accessibility is not an issue.
Go over the rules for early lease termination as well. Particularly the rules for overnight guests. While it’s unreasonable to forbid overnight guests, even for extended stays, you also don’t want to be so lenient that your unit can be used as an Airbnb without your knowledge, or for someone to be an unauthorized tenant.
It’s your responsibility to know the federal fair housing law. The Fair Housing Act mandates that there be no discrimination against tenants or any rental applicant. The law establishes seven protected classes, which are categories that cannot be used as grounds for denying housing.
- National origin
- Familial status
State and local laws can be more forceful than federal fair housing laws, so make sure you know them well. Violating fair housing laws is extremely costly.
If a tenant or a prospective tenant files a fair housing claim against you, there will be a lengthy investigation. If you're found guilty, you could be fined several thousands of dollars.
It's hard to recover from that type of mistake. So, be compliant, consistent, and document everything in writing.
Fair Chance Housing Ordinances
Many cities have fair chance housing ordinances. For example, Oakland's Fair Chance Housing Ordinance means landlords and property managers can’t use criminal background checks to eliminate potential applicants.
This is fair considering that many people are arrested and convicted unfairly and that having a criminal history doesn't mean you'll be a bad tenant.
Getting a reference from a previous landlord is just one part of your tenant screening process. You want to make sure your tenants are well screened so that you can worry less about rental income and focus on scaling your investment portfolio.
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