Every Landlord's Legal Guide

Introduction

Choosing tenants is the most importantdecision any landlord makes, and to do itwell you need a reliable system. Follow thesteps in this chapter to maximize your chances ofselecting tenants who will pay their rent on time,keep their units in good condition, and not causeyou any legal or practical problems later.

Cross-Reference: Before you advertise your property for rent,make a number of basic decisions—including how muchrent to charge, whether to offer a fixed-term lease or amonth-to-month tenancy, how many tenants can occupyeach rental unit, how big a securitydeposit to require,and whether you’ll allow pets. Making these importantdecisions should dovetail with writing your lease or rentalagreement. (See Chapter 2.)

First Time Choosing Tenants?

All the rules and procedures for choosing tenantsmay seem overwhelming the first time around.This chapter provides all the legal and practicalinformation and forms you need to do the job right.You can also get a lot of advice from talking withother landlords. You may want to check out localor state rental property associations, which rangefrom small, volunteer-run groups of landlords to substantialorganizations with paid staff and lobbyists,that offer a wide variety of support and servicesto their members. Here are some services that may beavailable from your landlords’ association:

• legal information and updates through newsletters,publications, seminars, and other means
• tenant screening and credit check services
• training and practical advice on compliancewith legal responsibilities, and
• a place to meet other rental propertyownersand exchange information and ideas.

If you can’t find an association of rental propertyowners in your phone book, ask other landlordsfor references. You can also contact the NationalApartment Association (NAA), a national organizationwhose members include many individual state associations(www.naahq.org).

Avoiding Fair Housing Complaints and Lawsuits

Federal and state antidiscrimination laws limit whatyou can say and do in the tenant selection process.Because the topic of discrimination is so importantwe devote a whole chapter to it later in the book(Chapter 5), including legal reasons for refusing torent to a tenant and how to avoid discriminationin your tenant selection process. You should readChapter 5 before you run an ad or interviewprospective tenants. For now, keep in mind fourimportant points:

• You are legally free to choose among prospectivetenants as long as your decisions are based onlegitimate business criteria. You are entitledto reject applicants with bad credit histories,income that you reasonably regard asinsufficient to pay the rent, or past behavior—such as property damageor consistentlate rentpayments—that makes someone a bad risk.A valid occupancy limit that is clearly tied tohealth and safety or legitimatebusiness needscan also be a legal basisfor refusing tenants. Itgoes without sayingthat you may legally refuseto rent to someone who can’t come up with thesecurity deposit or meet some other conditionof the tenancy.
• Fair housing laws specify clearly illegal reasons torefuse to rent to a tenant. Federal law prohibitsdiscrimination on the basis of race, religion,national origin, gender, age, familial status,or physical or mental disability (includingrecovering alcoholics and people with a pastdrug addiction). Many states and cities alsoprohibit discrimination based on marital statusor sexual orientation.
• Anybody who deals with prospective tenants mustfollow fair housing laws. This includes owners,landlords, managers, and real estate agents,and all of their employees. As the propertyowner, you may be held legally responsiblefor your employees’ discriminatory statements orconduct, including sexual harassment.("Your Liability for a Manager’s Acts," in Chapter 6, explains how to protect yourself from your employee’s illegal acts.)
• Consistency is crucial when dealing withprospective tenants. If you don’t treat all tenantsmore or less equally—for example, if youarbitrarily set tougher standards for rentingto a member of a racial minority—you areviolating federal laws and opening yourself upto lawsuits.How to Advertise Rental Property

You can advertise rental property in many ways:

• putting an "Apartment for Rent" sign in front ofthe building or in one of the windows
• taking out newspaper ads
• posting flyers on neighborhood bulletinboards, such as the local laundromat or coffeeshop
• listing with a local homefinders’ or apartmentfindingservice that provides a centralized listing of rental units for a particular geographic area
• posting a notice on Craigslist (see “Craigslistand Online Apartment Listing Services,” below,for details)
• listing with a local real estate broker thathandles rentals
• hiring a property management companythat will advertise your rentals as part of themanagement fee
• posting a notice with a university, alumni, orcorporate housing office, or
• buying ads in apartment rental guides ormagazines.

The kind of advertising that will work bestdepends on a number of factors, including thecharacteristics of the particular property (such asrent, size, amenities), its location, your budget, andwhether you are in a hurry to rent. Many smallerlandlords find that instead of advertising widely andhaving to screen many potential tenantsin an effortto sort the good from the bad, it makes better senseto market their rentals through word of mouth—telling friends, colleagues, neighbors, and currenttenants.

Craigslist and OnlineApartment Listing Services

Dozens of online services now make it easy to reachpotential tenants, whether they already live in yourcommunity or are moving from out of state.

Craigslist and other online community postingboards allow you to list your rentals at no or lowcharge and are a good place to start. Craigslist, themost established community board, has local sitesfor every major metropolitan area. Check out www.craigslist.org for details.

National apartment listing services are alsoavailable, with the largest ones representing millionsof apartment units in the United States. Some of themost established are:

• www.move.com
• www.apartments.com
• www.rent.com
• www.apartmentguide.com, and
• www.forrent.com.

These national sites offer a wide range of services,from simple text-only ads that provide basic informationon your rental (such as the number of bedrooms)to full-scale virtual tours and floor plans of the rentalproperty. Prices vary widely depending on the typeof ad, how long you want it to run, and any servicesyou purchase (some websites provide tenant-screeningservices).

To stay out of legal hot water when you advertise,just follow these simple rules.

Describe the rental unit accurately. As a practicalmatter, you should avoid abbreviations and real estatejargon in your ad. Include basic details, such as:

• rent and deposit
• size—particularly number of bedrooms andbaths
• location—either the general neighborhood orstreet address
• move-in date and term—lease or month-tomonthrental agreement
• special features—such as fenced-in yard,view, washer/dryer, fireplace, remodeledkitchen, furnished, garage parking, doorman,hardwood floors, or wall-to-wall carpeting
• pets (whether you allow or not and anyrestrictions)
• phone number or email for more details(unless you’re going to show the unit only atan open house and don’t want to take calls),and
• date and time of any open house.

If you have any important rules (legal and nondiscriminatory),such as no pets, put them in yourad. Letting prospective tenants know about yourimportant policies can save you or your managerfrom talking to a lot of unsuitable people. Forexample,your ad might say you require creditchecks in order to discourage applicants who have ahistory of paying rent late.

Be sure your ad can’t be construed as discriminatory. The best way to do this is to focus only on therental property—not on any particular type oftenant. Specifically, ads should never mention sex,race, religion, disability, or age (unless yours is reallylegally recognized senior citizens housing). And adsshould never imply through words, photographs,or illustrations that you prefer to rent to peoplebecause of their age, sex, or race. For example,an ad in an environmental or church newsletter thatcontains a drawing of a recognizably white (or blackor Asian) couple with no children might open you toan accusation of discrimination based on race, age,and familial status (prohibiting children).

Quote an honest price in your ad. If a tenant whois otherwise acceptable (has a good credit historyand impeccable references and meets all the criteriaexplained below) shows up promptly and agreesto all the terms set out in your ad, you may violatefalse advertising laws if you arbitrarilyraise the price. This doesn’t mean you are always legallyrequired to rent at your advertised price, however.If a tenant asks for more services or different leaseterms that you feel require more rent, it’s fineto bargain and raise your price, as long as yourproposed increase doesn’t violate local rent controllaws.