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Housing

posted on 15 May 2007

Are You a Landlord or Want to Become One? If So, Screen Your Tenants!

By Maria Aguila, Esq.

Renting properties is vital part of providing safe and secure, comfortable housing in the community. For landlords and property owners, renting properties can be a profitable, rewarding business. However, it can quickly become your worst nightmare if you are a landlord and you do not do the one basic thing that all landlords should do: screen your tenants!

Fair Housing laws do not allow landlords to select their tenants based on race, color, national origin, gender, religion, handicap and familial status. So long as the tenant qualifies to rent that property, the landlord must rent to that tenant.

Landlords are permitted, however, to screen tenants for credit, criminal background and so on. Landlords who fail to carefully screen tenants and maintain consistent policies regarding their screening process are only begging for trouble.

Let me give you an example: Landlord with a rental home was in a rush to rent it out. A potential tenant and his family inquired about the home, liked the home, and without screening the tenants, landlord and tenant signed a one-year rental agreement to pay $1,500.00/month. Little did the landlord know that the tenant had seven (7)judgments against him for money owed to credit cards companies, child support, etcetera and that this tenant had filed bankruptcy only a few years back. Two months into the lease, tenant bounces a check, then another. Landlord forgives him, accepts his rent payments well beyond the due date with late fees attached, and then tenant fails to pay rent the next month. Landlord is now trying to evict the tenant for nonpayment of rent and has incurred quite a financial loss.

So the lesson is this: Screen your tenants carefully! There are four (4) main criteria all landlords should screen tenants for and they are as follows: 1) credit history; 2) criminal history; 3) rental history; and 4) sufficient income. I will briefly discuss these categories.

1) Credit History: This can be difficult to nail down as a written policy, because credit history has subjective factors that go beyond the credit score. Some landlords mandate a particular credit score; others charge higher security deposits based on credit scores or have a sliding scale of security deposits (basically, the higher your credit shore, the less you need to pay for security deposit). Landlords will also want to consider how the tenant has treated previous creditors. In general, credit history should reflect appropriate care and concern for all financial obligations; the higher the credit score, the better the tenant.

2) Criminal History: Here's a great question to address this often-sensitive area: "Have you ever been in the back seat of a police car"? It's up to you to establish your policy here. Point is to have a policy and stick to it. A common company policy regarding criminal history is: no felony convictions in the past seven years and no sexual offenses ever. It is frightening how many landlords skip right past this and in the process rent to potentially dangerous people. Think about this: every dangerous criminal who is not in jail is renting a place to live. Do you want one in your home? Tip: Make sure to conduct a national criminal history check, not just in your local jurisdiction. Your tenant may have no criminal history in your state, but what about that outstanding warrant for armed robbery in Nevada? Or criminal conviction for illegal drug possession in California?

3) Rental History: Who knows better what your experience will likely be with that potential tenant than the previous landlord? Honestly, why not ask previous landlords about their experience with the applicant? The phone call is free, and you have thousands of dollars at stake!

4) Sufficient Income or Income to Debt Ratio: This is the first question to ask potential tenants because if they do not make enough money to pay the rent, there is no reason to continue with the interview. Rent and utilities should be less than one third of the total family income after taxes. Verify income the same way your banker did when you financed the property: get a pay stub or the last three months of bank statements. If they do not have deposits at least equal to their stated income, you should find out why. Typical incomes to debt ratios are two to three times the amount of the tenant's gross income.

In the rental industry, it is standard procedure to screen for the above listed categories. Landlords may charge back the cost of conducting such an investigation; usually, the cost is $25.00 - $75.00 per rental application. If the tenant passes the test, landlords then have the green light to rent the property out. Happy screening!

MARIA AGUILA

is a solo law practitioner who focuses her practice on immigration, adoptions, Fair Housing, landlord/tenant, and real estate law. She is a member of the Florida Bar, U.S. Middle District of Florida federal court, American Immigration Lawyers Association, President of the Jacksonville Asian American Bar Association, a legal organization she founded four years ago, and a member of the Jacksonville Asian American Alliance and the First Coast Asian Chamber of Commerce. She also teaches legal writing at Florida Coastal School of Law. She may be reached at 904-638-1338 or at mariadeg @ bellsouth.net.