Table of Contents

1. Choosing Good Tenants Makes Good Business Sense

• Ten ways to keep your rental business profitable
• How to use the Landlord's Forms Library
• Why good record keeping is so important - and how to do it

2. Complying With Discrimination Laws

• Legal discrimination: Valid reasons for rejecting applicants
• Rental properties exempt from antidiscrimination laws
• Types of illegal discrimination
• Occupancy standards: How many tenants are too many?
• Managers and discrimination

3. How to Deal With Current Tenants - Before You Look for New Ones

• Send departing tenants a move-out letter
• Do a pre-move-out inspection of the rental
• Inform tenants of your plans to advertise and show the rental
• Ask departing tenants to complete an exit questionnaire
• How to work with tenants who are not leaving voluntarily
• What happens when you can't deliver the rental on time?

4. How to Advertise Effectively

• Prepare a rental property fact sheet
• Identify your market
• Create a Marketing Worksheet
• Use word-of-mouth
• Set up a tenant referral program
• Post "For Rent" signs
• Drafting written ads
• Advertise online
• List with local employers
• Use a real estate office to advertise for and screen tenants

5. How Should You Show Your Rental?

• Individual property tours
• Private open houses
• Public open houses

6. Preparing Your Rental Application and Screening Materials

• Your rental policies
• Your rental application
• 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
• Lease or rental agreement

7. Fielding Initial Questions and Phone Screening

• Make it easy to reach you
• Prepare a Rental Property Fact Sheet
• Prepare a Rental Property Comparison Chart
• Prepare a Tenant Information Sheet
• How to prescreen over the phone or in person
• Carefully document your conclusions
• Dealing with on-the-fence callers
• Schedule a site visit
• Should you negotiate on the first call or conversation?

8. Prepare Your Rental for an Open House or Showing

• Prepare the rental unit for an attractive showing
• Prepare the rental unit for a safe showing
• Prepare the rental unit for a secure showing
• How to plan for and do repairs and refurbishing

9. Face to Face: Showing the Rental and Negotiating
With Prospective Tenants

• How to hold an open house
• How to conduct an individual showing
• Talk with your visitors and answer questions
• Field questions thoughtfully
• Sell your property, but don't puff
• How to negotiate with prospective tenants
• Discussions with applicants with a disability
• What's the next step for your visitors?
• Conduct a wrap-up

10. Evaluating Rental Applications

• Log in every application
• Confirm receipt of credit check fee and consent form
• How to review Rental Applications

11. Checking Applicants' Credit Reports

• How to get a credit report
• What's in a credit report?
• The limits of credit reports
• How to evaluate an applicant's credit report
• Rerank your applications
• Handle credit reports, criminal background reports, and tenant-screening reports carefully

12. Checking Landlord, Employer, and Personal References

• Contact past and current landlords
• Contact current employer
• Contact personal references
• Reranking and rejecting applicants after talking with references

13. Checking Applicants' Criminal Backgrounds

• Your qualified legal right to reject tenants with criminal backgrounds
• How to avoid renting to people with dangerous criminal backgrounds
• The basics of criminal background checks
• The risks of running a criminal background check
• The risks of not running a criminal background check
• How to decide whether to do a criminal background check
• Inform prospective tenants of your policy and get consent
• How to do a Megan's Law search on your own
• How to get a criminal background report
• How to reject following a Megan's Law or criminal background check

14. How to Choose and Work With a Tenant-Screening Agency

• How useful are tenant-screening services?
• Obtain written consent from applicants
• How to find a tenant-screening service (and how much they cost)
• How to evaluate services provided by tenant-screening firms
• How to use the screening report
• Accepting and rejecting applicants based on screening reports

15. Choosing Your New Tenant

• What to do when you have no qualified applicants
• How to choose among qualified applicants
• How to communicate an acceptance
• Conditional acceptances and adverse action letters
• How to deal with cosigners
• Holding deposits
• Signing the lease or rental agreement

16. How to Reject - What to Say, What to Write

• Ten tips on how to reject
• Adverse action letters
• Rejections: How to say them, how to write them
• Communicate post-application rejections by mail or email

Appendix

• Using Forms
• Editing RTFs
• List of Forms

Index   

Chapter 1
Choosing Good Tenants Makes Good Business Sense

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.

You’ll save the time, money, and headaches of terminating a tenancy or filing an eviction lawsuit (or fighting a tenant-initiated lawsuit).

Other tenants are more likely to stay put, and

You’ll have a steady cash flow.

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.

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.

Be consistent

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. 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.

Screen thoroughly, then rank your applicants

Always take the time to do the checking necessary to assure yourself that a 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.

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, 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.

Cautious landlords will screen both members of a marriage or domestic partnership. You should be on solid ground if you reject the twosome because one has a history that would justify rejection of any tenant—for example, recent and multiple evictions. But suppose you’re faced with a couple composed of one income-earner and another who has no job (perhaps a stay-at-home parent) or brings in a small income. Rejecting this couple could be risky, because of the federal protections that extend to families.

Get professional help or advice when you need it

Though there’s a lot you can do yourself, you may want the advice of a local landlords’ association for help on issues that have practical solutions known by experienced landlords. 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 on Nolo.com. (See the appendix for the link.)

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, or that you’ve saved files to the cloud.

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, this file 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.