First off, there will always be tenants who are especially sensitive to noise. A neighbor could have his windows open on a hot summer day with the television blaring. Of course, this will make a lot of noise and will cause those around him some discomfort.

It would be very simple—if you receive a complaint about this neighbor and the noise he is creating—to walk over, knock on the door, and explain to him that the noise level is causing others around him some grief. Most reasonable people will figure out a way to compromise.

However, there are certainly unreasonable people that will tend to push buttons. These are people who may play their music really loud and refuse to turn it down when asked politely. They may retort, “It’s not bothering anybody.” Actually, it may be bothering a whole lot of people. The belligerent tenant will hear none of that.

Worse yet, he could say, “I don’t care. I’m playing my music however I want.

In any case, when excessive noise complaints arise, it behooves you to act swiftly and nip the issue in the bud, so to speak. Be proactive!

Write a letter to the tenant in question. Try to figure out how to negotiate a settlement without giving up too much. All the noise maker really wants is some attention. Give it to him, but be firm in your request that he turn the noise level down.

Depending on your jurisdiction, you may have to call out the police to take a decibel reading. Many local statutes have set a noise level, over which fines can be given. If your tenant is making enough noise to surpass the lawful level, you may have to begin eviction proceedings. Usually staring these proceedings is enough to get the offender to turn down the noise.

In case it doesn’t, you have at least gotten the eviction ball rolling. Make sure that you read your rental agreement that you and the tenant signed—sometimes there are surprises in rental agreements.

Often you may find that your rental agreement is not firm enough. Other times, you will find that there are some pretty clear thresholds, over which you can begin corrective action (i.e., eviction proceedings).

Remember that your rental agreement really is your only supporting document for a whole host of issues, noise being just one of them. If you believe that your rental agreement isn’t strong enough, consider having it revised by an attorney with experience and a deep understanding of rental properties.

The post Landlord Tips: How to Handle Excessive Noise From a Tenant appeared first on FidelisAM.com.

Using a generic lease

While it may be a lot cheaper to find a free lease or rental agreement online, choosing this route can be very costly. As soon as you have a conflict with a tenant, where do you think the tenant begins looking? Right! He will immediately pull out the contract and begin looking for loopholes. If he’s smart, he will hire an attorney (if the matter is of great enough severity); attorneys are paid to find issues with legal documents.

You can rest assured that a competent lawyer will find multiple shortcomings in generic leasing and renal agreements.

Do yourself a favor and get an agreement written by an attorney who specializes in rental property. You will have to pay more up front but your back-end costs will be limited, especially if you avoid the next mistake.

Failing to read or follow the agreement

Now that you have paid for a solid rental agreement, it is up to you to read it, know it, and follow it! A very common mistake that landlords make is assuming that something has been written into the lease that really isn’t there. Make sure that you fully understand the rental agreement forwards and backwards.

If there is something you do not understand, call the attorney who wrote it up for you and have her explain it to you.

You literally cannot afford to be lax in this area.

Poor rental applicant screening

This is a HUGE MUST. You must screen your rental applicants closely! There is no better predictor of tenant issues than past issues that tenant has had at other places. Seek the guidance of an experienced property management screening company to enable you to perform a proper and thorough applicant screening.

Eviction proceedings

Sooner or later, you will be faced with a decision: Should I evict my tenant? Sadly, this really should not be a decision, in fact. Rather, it should be a step in the process of dealing with problem tenants.

If a tenant is late with rent, you must follow the prescribed steps in your jurisdiction to begin eviction proceedings. It is to cover your assets, so to speak. If you don’t begin the proceedings properly now, you will have to play catch up later.

Often times, the tenant will pay his rent after he gets a “pay or quit” notice. As a matter of fact, when you take the necessary first step, you are putting the legal “ball” in the tenant’s court. You are asking for rent; if the tenant chooses not to pay, then he’s also chosen to “quit,” which means that he is aware that further inaction on his part will result in further action on your part.

It really is just a part of a process. Be prepared and act when appropriate.

Failure to remedy service requests

If you delay in responding to tenant service requests, you are setting yourself up for failure. Respond immediately, even if the request seems to be insignificant. As we are all aware, many minor issues, left unattended, turn into major issues eventually.

Additionally, you are setting a tone with the tenant that you don’t value them. This is simply poor customer service and your tenant may decide that if you don’t react promptly to her requests, then she will follow suit and neglect to respond to your requests in a timely manner as well.

Either way, you are setting yourself, and your tenant, up for some rough times. Take care of service issues immediately.

The post Top 5 Most Common Mistakes Made by Landlords appeared first on FidelisAM.com.

The most basic of pricing strategies is to take your cost and add a percentage to it. If your cost of one apartment unit is $1,000 to maintain (for both short- and long-term), you could simply add 25 percent to that figure to arrive at $1,250 per month for each rental unit.

But that pricing method does not really factor in vacancy rates, natural disasters, or rising costs. So you must put in a “fudge factor” that will have to cover those unknown and unforeseen costs. Therefore, in order to get a return on investment (ROI) of 25 percent, you may have to add 30, 35, or even 40 percent to the marginal cost of maintaining one apartment unit.

Some property owners set their apartment rents based on comparisons to home ownership (mortgage payments) for similarly sized properties. This can work but it certainly is not optimal. In fact, when home prices are falling—as they have been the past 3-4 years in many areas—rents have been going up.

This is because as houses became less desirable, rentals became more desirable—people still need a place to live and if they do not want to live in a house, they are forced into living in an apartment or rental of some sort.

If you had practices this method of setting your rental prices, you would have left a lot of money on the table the past 3 to 4 years.

Another pricing method that property owners employ is taking a look at what surrounding properties are charging and setting their rents based on what their competition and peers have set. For example, a 2 bedroom 2 bath apartment unit down the street in a similarly equipped and furnished apartment complex, at about the same age and condition, may rent for $1,500.

It would be really easy to set your rent at $1,500 or a bit less if you want to ensure that you “win over” any prospective tenants from your peers. However, your apartment complex really may be more desirable and may be able to garner a higher—in some cases, much higher—monthly rent. You would not know that if you simply followed the crowd.

This last method—basing your rents on what your peers are charging for similarly-priced rental properties—is probably the best. You may want to experiment with slightly higher and slightly lower prices to determine just what the market may bear. You could wind up with better profits than your peers. There is also the notion that higher rents equate to a higher standard of living—you may get more interested prospects simply because you are charging a higher rent than the guys down the street. This “perceived value” concept goes a long way to determining the leaders and the followers in any market.

The post Landlord Tips: How to Determine the Optimal Rent appeared first on FidelisAM.com.

First and foremost, commercial and residential real estate property management requires a landlord with good business sense. While you do not necessarily need to have an MBA, you do need to have strong analytical skills, a love of numbers, and sound business knowledge under your belt. You have to be a go-getter and be very proactive with situations that could have major ramifications on the profitability of your rental property.

You will be collecting rent, making deposits, talking calls from prospective tenants and vendors, and making sales presentations every day and all day. You will also be managing issues like clogged toilets, broken pipes, and the occasional water heater outage. You have to be on your A-game at all times (or at least during business hours). You are the face of the company you represent to your tenants.

Of course, you can be friendly with your tenants, but it is never a prudent idea to become friends with them. There will come a time when you will have to enforce a rule and enforcing a rule against your friend is really a hard thing to do. It is best if you refrain from becoming friends in the first place.

Having high ethical standards is a must, too. You will be handling money and you will have the master key to every apartment unit on your property. You will also be entrusting repair men, paint crews, and service company personnel with access to your tenants’ apartments. Your integrity must never be questioned.

In order to be an effective property manager, you will need to develop a skill that many business people never develop—listening. Look, most people find it a waste of time to complain, so you can rest assured knowing that if a tenant has a complaint, it is either viable or it is a lead-up to a bigger issue. It behooves you to listen, therefore, to your tenants whenever they have a grievance. Doing so could uncover another problem that has not had a chance—yet—to grow and fester.

In other words, by just simply listening, you can avert a lot of major problems.

While “rules are rules” and they are in place for a reason, know, too, that rules were meant to be broken from time to time depending on context and circumstances. Again, listen to your tenants and try to understand where they are coming from. Once in a while, you will have to bend or break a rule that is otherwise “hard and fast.” It is okay. It is a part of conducting business.

As you can see, being a successful landlord or property manager requires good business sense, high moral and ethical values, a willingness to listen and understand your tenants, and the ability to break a rule now and again when the situation calls for it.

The post How to Be a Successful Landlord or Property Manager appeared first on FidelisAM.com.

You will find that this happens very frequently in so-called “college towns.” The in- and outflow of students can be a bit overwhelming at times. However, it is a fact of life and a part of the business. Roommates who grew up together and have been friends for decades may find that they cannot live together. They may argue loudly and bother your other tenants or they may have physical altercations that put other tenants at risk of bodily injury.

A roommate may also have difficulty paying rent. It’s far better to allow that tenant to vacate than to have the entire rental unit go vacant. This is where knowing your tenants and knowing how to negotiate play huge roles in keeping your rental units occupied.

Suggest to the tenant that remains that he can advertise in the common areas that he is seeking a new roommate. He can also advertise on campus and in the newspaper. You can certainly help him find a roommate to replace his old roomie.

Again, it is far better to replace a tenant in a roommate situation than it is to fill a vacancy. So do everything in your power to help out your tenant who is losing a roommate.

Of course, in a college town, you are also faced with the very high probability that many of your tenants will want to return home for summer vacation, leaving you with a lot of vacancies. This, of course, is why rental agreements and leases in college towns are 12 months long rather than 9 months long—you get the assurance of those 3 summer months of full rent.

This is not to say that your tenants won’t go home anyway. You can earn a lot of good will simply by suggesting to your college-age tenants who want to return home that they find people they can sublet their apartments to. This is a common practice in towns and cities that have thousands of college-age students.

The concept is quite simple: As a landlord or property manager, you can consent to a subleasing agreement between your tenant and his subtenant. Of course, you can also decline. Your tenant is still financially responsible for all rent that is owed to you and he will be held liable for any non-payment.

However, you will be better off in the long run if you help your tenants find subtenants. They will most likely return when school starts up again. You will also get the benefit of having an occupied apartment for the three months that your tenants are gone. You may be amazed at how quickly an apartment unit goes downhill when nobody is in it. You will have to do more cleaning and maintenance if you don’t fill the space with a subtenant.

It’s just a part of the business.

The post Landlord Tips: How to Add a Roommate Onto a Rental Agreement appeared first on FidelisAM.com.

When you and a tenant sign a rental agreement or lease, you both are bound to the terms of the contract. Most times, however, it will be the tenant who initiates the early termination of a lease, either intentionally or unintentionally. It is rare that a landlord or property owner breaks a lease. Of course, it does happen; it is just a very infrequent occurrence.

Most of the time, a tenant will seek an early termination to a lease or rental agreement because he needs to move to another location, for whatever reasons. Many times, the tenant needs to move away from the area for a job. Obviously, he will seek to terminate the lease before it naturally expired. We suggest that you work with the tenant to make his move as painless for you and him as possible.

Of course, if he wishes to vacate his rental unit early, you have to cover yourself. You will want to get as much notice as humanly possible so that you can seek out a new tenant to fill the vacancy as soon as possible.

You obviously want to find a new tenant as soon as possible, going through your normal tenant screening process.

The goal is to have a paying tenant in your rental unit for as much time as possible with little to no time in a vacant state. Every day you are without a paying tenant, your past tenant has to pay.

It behooves you to work with your tenant who wants to leave early.

However, things get a bit messier when your tenant ups and leaves without notice and you have to way to get in touch with him after he leaves. Things are muddled, too, when you initiate—knowingly or unknowingly—breaking a lease.

It is not uncommon to wake up one morning to find that one of your rental units had been vacated without any notice. In this case, you had better follow all the proper procedures of your state. You want to make sure that you document everything. You should try to find your ex-tenant, but you also need to find a new tenant to fill the vacancy, making you re-double your efforts.

Now, if you breach a rental agreement or lease, your tenant has a right to end the lease before its end date. He technically did not break the lease—you did.

In most jurisdictions, a tenant must give you 30 days or more notice before vacating the premises. This should give you enough time to find a new tenant. In some jurisdictions, even with 30 days notice, the former tenant owes rent all the way up until the end of the lease or agreement, provided that the rental unit has not yet been occupied.

Do not think, however, that you can bring in a new tenant and keep collecting rent from the former tenant simultaneously. You cannot do this!

As you can see, there are some nuances around breaking a lease. Most often, leases and rental agreements are broken by your tenants. Work with them and then get busy finding a new tenant.

Need a rental agreement? Use ours!

The post Landlord Guide: What Happens When a Tenant Breaks Their Lease? appeared first on FidelisAM.com.

Either party to a lease, the renter or the landlord, can initiate a renewal. Of course, after 12 months, a lease renewal is pretty automatic: It either kicks off another annual lease or it turns month to month. Generally speaking, if all went well, leases are renewed with both parties happy to extend the relationship. Occasionally, a renter may need to move to another area at the expiration of a lease or she may want to move to a place where the rent is cheaper. But for the most part, most rental agreements are renewed.

“What if I don’t want to extend or continue the lease agreement?”

However, once in a while, you may not want to continue the agreement. At the time of lease renewal, you can simply refrain from offering another one-year lease and let the lease convert to a rental agreement on a month to month basis, per the original terms of the lease.

Alternatively, if you don’t want to go down that road because you believe it would be in your best interests to have the tenant move out, you can simply refrain from offering a new lease and you do not have to have a reason. Simply do not extend the term or offer a new lease.

There are many reasons you may not want to extend a new offer. Perhaps the tenant was late on rent frequently and you just do not want to deal with that again for another 12 months. Or maybe he played his music too loud and bothered his four nearest neighbors. Losing four tenants is far worse than losing one.

It will be much easier to raise the rent to market levels with a new tenant than with an existing one, so that could play a part, too.

Of course, your tenant could turn the tables on you and tell you that he does not wish to renew. That is perfectly acceptable. He may want to move to the other side of town, or perhaps he got a new job that takes him far away. Or maybe he wants to save money on rent by moving elsewhere.

Obviously, there is a myriad of reasons for not renewing a lease, from both the landlord and consumer’s standpoints.

If both parties decide to renew, make sure that you don’t just step through the motions. Make sure that you modify the lease appropriately (with higher rent, for example); don’t just re-sign a new lease without reading it in full and understanding that some things must change before a new lease is signed.

As you can see, renewing a lease or rental agreement is a fairly straightforward process. Do not get caught up in the nuances, but certainly read your leases in full with a fine-tooth comb and know what you can and cannot do from a legal standpoint.

Need a lease agreement? Click here

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Tenant screening is a popular topic on the World Wide Web and elsewhere. More and more companies are providing tenant screening services of increasing sophistication, and we advise our readers to use them. In doing so, however, the landlord subjects himself to the strictures of the Federal Fair Credit Reporting Act. This act is comprised of 24 sections of the United States Code, most of which have nothing to do with the landlord if he utilizes tenant screening reports. This article is an effort to cull those requirements that affect the landlord who uses screening services or credit reports and explore what they entail. This column is not an attempt to report upon the privacy and credit laws which may exist in particular states or localities. These are too numerous to deal with in one place.

A tenant screening report is undoubtedly a consumer report subject to the Act. The definition of “consumer report” is at 15 USC Sec. 1681(a)(d) and reads as follows:

“The term “consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes….”

As a user of a consumer report the landlord must establish reasonable procedures to assure compliance with the law. Having and observing such reasonable procedures will ensure that in the event of an honest mistake, the landlord can avoid liability. 15 USC Sec. 1681m(d). We will attempt to suggest such procedures during the course of this column. The terms “credit report” and “tenant screening report” will be used interchangeably throughout this column.

WHEN A CREDIT REPORT MAY BE OBTAINED

The circumstances under which a consumer report may be issued are covered at 15 USC Sec. 1681(b), and in pertinent part read:

“(a)…[Any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

***

"(2) In accordance with the written instructions of the consumer to whom it relates.

"(3) To a person which it has reason to believe

"(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or

***

"(F) otherwise has a legitimate business need for the information (i) in connection with a business transaction that is initiated by the consumer, or (ii) to review an account to determine whether the consumer continues to meet the terms of the account."

What this means to the landlord is that, in order to obtain a report, he must demonstrate to credit reporting agency that:

1. the applicant has requested the report, or

2. the landlord is obtaining a report in connection with an application initiated by the applicant, or

3. the landlord is reviewing the credit of an existing tenant, or a former tenant who owes him money, or

4. the landlord is reviewing the credit of an existing tenant in order to decide whether to renew a lease or otherwise continue the landlord/tenant relationship.

Should the landlord misrepresent his interest to obtain a credit report where one of these interests does not exist, he probably would be liable both to the reporting agency and the prospect or existing tenant.

Compliance requirements arise in two phases of the landlord/tenant relationship. The first is at the point at which the prospect initiates the application process. The second phase is during an existing landlord/tenant relationship, or in connection with a debt which arose out of it. A third possibility, the initiation of the application process by the landlord is a scenario we have never witnessed, and will not be discussed.

At the first phase of the relationship, the prospect has signified his desire to rent one of the available units and has filled out an application. At this point, the landlord has the right, without any authorization from the applicant, to obtain a credit report.

The key to the right to obtain a report is that there is an existing transaction. There may be no existing transaction if there is no rental unit available at the time of the application. In the event the landlord accepts applications during periods of no vacancy in order to have prospects on file in the event of a vacancy, a procedure which has been suggested by some writers, we do not recommend that a credit report be obtained until a vacancy develops and further contact is made by the landlord to assure continuing interest in pursuing the application process. In any event, there are practical reasons for not obtaining such reports, including their cost and the fact that they may become stale quickly. A report should be obtained in connection with such an application only if the prospect has explicitly and in writing authorized it and instructed the landlord to obtain it and credit reporters to supply it.

Even though written authorization is not required, any credit reporting agency will advise that it be obtained. The authorization should be included in the body of the application, in plainly visible type, immediately above the signature line or lines. The language should not only permit the landlord to obtain a report, but, and perhaps out of an excess of caution, instruct him to obtain one, and all credit reporting agencies to provide one. In the event more than one person must be checked, each such person should sign. Identification must be checked for each applicant, which the landlord should do during the application process anyway. In the event the landlord desires to put the authorization on a stand alone document, or attachment to the application, place signature lines on the document or attachment. Do not simply staple the authorization to the application form and then have the applicants sign only the form. A sample of apt language is as follows:

I/we, the undersigned, authorize and instruct [name of landlord] to obtain such credit reports and tenant screening reports as he deems necessary or prudent, and authorize and instruct any and all credit reporting agencies and tenant screening services to provide such reports to [name of landlord].

In the second phase of the landlord/tenant relationship, the parties are in the midst of a business transaction, the lease or rental agreement, or there is a debt owing as a result of it that the landlord needs to collect. Here, again, the landlord has the right to obtain credit reports without any authorization by the tenant. Obtaining a report without written authorization is not attended by the same risks as doing so before the inception of the landlord-tenant relationship because the ongoing business transaction is demonstrable.  This must not, however, be construed as authorization to pull credit reports out of curiosity. The landlord would be well advised to develop a policy defining the circumstances under which a report might be obtained. Here are some examples of things that might be cited as triggers for obtaining a credit report.

1. renewal of a fixed term lease for a period greater than six months

2. default in the payment of rent for a period of more than ten days

3. occurrence of damage to the rental unit reasonably suspected to be in excess of the security deposit

4. initiation by the landlord of a legal proceeding arising out of the rental agreement

5. vacation of the rental unit with money owing

The principle is to define, but not unduly restrict, the circumstances under which a need to have the information has arisen.

There are ample reasons for such a policy. Bodies of law concerning rights to privacy exist in all jurisdictions in the United States. If the landlord obtains a credit report without the ability to define a need to know, he may well incur liability for invasion of privacy. Inquiries are reported by credit reporting agencies. Many businesses interpret repeated inquiries without an extension of credit as negative, so that such inquiries will damage the tenant’s credit worthiness. Such damage might give rise to an action against the landlord in tort if he is the culprit. The landlord should set up the circumstances under which he will make credit inquiry of existing tenants in writing in advance, and stick to the policy, so he can justify his actions at a later time if necessary.

WHAT THE USER CAN AND CANNOT DO WITH THE REPORT

Credit reports can only be issued to persons who have a legitimate interest in obtaining them. This implies that the report should not be distributed or given to others. Credit reports should be kept in a secure location and access to them limited to those with a need to know.

Credit reporting firms make their money by supplying such reports for a fee. They will require that the landlord keep them confidential and not distribute copies to others. The landlord’s contractual obligation with the company will prohibit him from giving a copy of the report to anyone else, even the prospect or the tenant. Unless a specific state law overrides the contract and requires provision of a copy to the prospect or tenant, the contractual obligation must be respected, or the landlord will soon find that no one will do business with him.The landlord has every right, however, to disclose the contents of the report, as distinguished from giving a copy to the prospect or tenant, and even to show it to the prospect, at 15 USC Sec. 1681e(c):

“(c) A consumer reporting agency may not prohibit a user of a consumer report furnished by the agency on a consumer from disclosing the contents of the report to the consumer, if adverse action against the consumer has been taken by the user based in whole or in part on the report.”

If the landlord, based on the contents of the report, takes an adverse action, such as denying the applicant or demanding additional consideration of any sort for the rental, then he may disclose the contents of the report. Note, however, if the landlord does not take adverse action, the company can bind him not to disclose the contents of the report. This is important as, where adverse action is taken, the landlord might wish to discuss the derogatory information with the applicant to obtain an explanation. If the explanation results in a decision not to act adversely after all, then this should be noted in the landlord’s screening notes.

WHAT ADVERSE ACTION REQUIRES THE LANDLORD TO DO

The landlord must do certain things when he takes adverse action against an applicant. In some instances, the information on which the adverse action is based need not even have come from the credit report. An adverse action is defined in the FCRA as an outright denial, or a demand for more security, or any other burden to the prospect, in order to be approved. An example of this last might be the demand for an increased security deposit, or prepayment of several months rent, to compensate for greater perceived risk from a tenant who has undergone an eviction.

The exact course of action the landlord must take depends on the source of the information which leads to the adverse action. There are three possible sources of such information: 1. credit reporting agencies, 2. third parties who are not credit reporting agencies, and 3. internal records or records of affiliates.

If the landlord takes adverse action in response to information in a credit report, then 15 USC 1681m(a) specifies:

“(a) If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall

“(1) Provide oral, written, or electronic notice of the adverse action to the consumer,

“(2) provide to the consumer orally, in writing, or electronically

“(A) the name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency complies and maintains files on consumers on a nationwide basis) that furnished the report to the person; and

“(B) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and

“(3) provide to the consumer an oral, written, or electronic notice of the consumer’s right

“(A) to obtain, under section 1681j, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (2), which notice shall include an indication of the 60 period under that section for obtaining such a copy; and

“(B) to dispute, under section 1681i, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency.”

If the reporting agency does not provide an appropriate notification letter, the following might be used as a form:

“We regret to inform you that your application to rent 1234 Main Street has been declined. This action was in whole or in part the result of information contained in a credit report. This report was supplied by Zapco Screening Services, 8888 Hindenburg Disaster Way, Anytown, MI, (999)098-wxyz, toll free (800)098-abcd. Zapco Screening Service did not make the decision to take this adverse action and is unable to provide the specific reasons why the adverse action was taken. You have a right to obtain a free copy of a report by making demand on Zapco Screening Service within 60 days of your receipt of this letter. You also have a right to dispute with Zapco Screening Service the accuracy or completeness of any consumer report furnished by them.”

Despite what the federal code says, the landlord should make the disclosure in writing, in hard copy, never orally or electronically alone. Nothing can substantiate compliance more effectively than a hard copy of a letter with the note “mailed 4/29/99.” The landlord should do this disclosure whether or not he has discussed the adverse action and the contents of the report informally with the applicant.

The second and third possibilities, information from third parties and information from internal records or third party affiliates, may be dealt with together.  Such information could be obtained from previous landlords, employers, personal references, affiliated companies, and internal records of previous transactions.  Adverse action based on these sources of information triggers no requirement of notification under the FCRA.

The Federal Trade Commission has already held that a rental agreement is not a credit transaction for the purposes of the act, although a little thought will show that it is a credit transaction, in the broad sense, in reality.  This is why there is no requirement for notification.  The Act requires notification if an adverse action is based on a report from a consumer reporting agency, including a screening service.  But according to an FTC staff opinion only a denial of credit, which a rental agreement is not, triggers the requirement of notification based on third party provided information.

This does not entirely close the book on the issue, however.  What is the rule when the landlord engages a tenant screening service and the service telephonically interviews the tenant’s references and provides a summary of the interviews in its overall report to the landlord?  What if the landlord denies the applicant based on information in the summary of an interview of a previous landlord or a personal reference?  The Riddle opinion does not cover this contingency because it was beyond the scope of the issue presented.  Good arguments exist for not giving notification under the act as well as the reverse.  The purpose of the Act and its notification requirements is to alert consumers to adverse information contained in reporting databases and give the consumer an opportunity to challenge and correct adverse information.  Notes of interviews are not included in a database the way credit card payments are, therefore, so the argument runs, such information should not be a notification trigger.  On the other hand, it is argued with equal force, the Act is quite clear that adverse action based on a report of a credit reporting agency, of which a screening service is one, triggers notification.  The prudent landlord should issue the same notification if he takes adverse action based on third party information developed by a reporting agency as he would issue if they reported an adverse court record or the like, at least until the FTC or a court of record clarifies this issue.

WHAT MAY BE CONSIDERED

The landlord is entitled to consider any information about the applicant that he has in his possession under the FCRA. Some have commented that one can consider information concerning the applicant only if it is less than seven to ten years old. FCRA limits the age of information that may be disclosed by a reporting agency at 15 USC Sec. 1681c, but has nothing to say about the age of information which the landlord may consider in making his decision to rent. The weight assigned to such information is probably slight due to its age, but that is a matter of judgment.

We have considered why the FCRA applies to landlords, what a credit report is and when it may be obtained, what may or may not be done with the report, and what to do when adverse action results from the report. It must be stressed that we deal only with the FCRA. The landlord using screening services must also inform himself of the requirements of State and local laws, because while Congress may have pre-empted the areas with which the FCRA deals, there is still considerable room for State action.

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When screening possible tenants, I am not sure what to do in regards to their criminal records, and when it is ok to reject an applicant due to their record.

Answer

Under the Federal Fair Housing laws, convicted criminals are not generally protected, but you still need to be careful who you reject based only on their criminal history. One of the biggest exceptions are people who were once convicted of drug use. Drug use is considered a disability and not a crime, therefore they are protected. This only works for people who used to use drugs, for if they currently use drugs, or are convicted of manufacturing and/or selling drugs, then you may have a right to not accept them.

That is only taking into account federal laws, and state laws may be more lenient. They may regard a criminal record as a personal characteristic and not let you use it as a basis to reject an applicant. To be safe, you may want to consult with a local attorney who knows all of the federal, state, and local laws in relation to criminal records before deciding to accept/decline an applicant.

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A. The easiest thing to do is to keep rent current, and stay on top of tenants who are late in making their payments. The following guidelines will make your job of collecting rent, and knowing who is late, much easier:

• Rent is due on the 1^st of every month
• It is late if not paid by the 2^nd
• On the 4^th, tenants who have still not paid their rent should be served with a three-day notice to Pay Rent or Quit

Once a tenant is late in paying their rent, stay on top of things, and make personal contact with each delinquent tenant as follows:

• On the 4^th day that rent has not been paid, serve the tenant with a three-day notice to Pay Rent or Quit, be sure to name everyone who is living the apartment that is 18 years of age or older.
• Fill out a Declaration of Service & Sign.
• Keep the original three-day notice to Pay Rent or Quit for the court, give the second copy to the tenant, and keep the third copy for your own records.
• On the 6^th day, if the tenant has not yet paid their rent, send the original three-day notice to the home office, along with the Declaration of Service & Sign, the original rental agreement and application, and Change of Terms Notice. Before sending them, double check that the three-day notice and the Declaration of Service & Sign have been filled out completely and accurately.

B. Late Charges are to be added if the rent is paid on the 3^rd day of the month, or later. Usually, a charge of $50 is added to the already owed rent, make sure that it is collected and do not let the tenant pay just the normal rent.

It is much cheaper for a tenant to pay their rent along with the late fee, than to be evicted. If they are evicted, they forfeit their deposit, and on top of that they have to pay legal fees and moving expenses.

In addition to having to pay more, there is the hassle of finding another apartment. This is going to be much more difficult due to the fact that they now have an eviction on their record.

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