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Why a landlord should have clear rental standards

As a real estate investor and landlord, one of your top goals is finding the best tenants to rent your property…and keeping them.

You want to find great tenants who will pay rent on time, every time. You want tenants who will follow the terms of the lease and take care of your property. And you need to find them while still following the letter of the law.

Why you should have a set of written rental standards

What are rental standards? They are minimum measurable qualifications tenants must meet to rent your property (that comply with Fair Housing laws). In other words, your rental standards are a written checklist of screening criteria you use every time you need to find a new tenant.

Why have set rental standards?

1. Your rental standards save you time

Your rental standards simplify the process of renting out your property. Sure, they take a little time to set up. But once in place, they can and will save you time. That is, provided they’re in writing and you make them available to prospective tenants.  

Give prospective tenants your written rental standards before showing them the property or having them fill out an application. Most people will not even fill out an application if they see that they cannot meet your rental requirements.

2. Your rental standards make the decision to approve/deny an application more objective

When you set your standards, the decision of whether to approve or deny prospective tenants will be a matter of them meeting your qualifications – or not. Your standards should be specific and quantifiable to remove any question of subjectivity.

3. Your rental standards reduce the chances of a discrimination claim

When prospective tenants read and understand your rental standards, they should be clear on your requirements. With this information, there is less chance of them filing a discrimination claim, as they can clearly understand the reasons for a denial.

4. Your rental standards provide written documentation in the case of a discrimination lawsuit

Having written rental standards lessen the chances of you being penalized or sued for discrimination. Since your rental standards are measurable and in writing, you can easily prove a denial, when you document everything.

For instance, if an applicant does not meet the minimum income requirements or credit score, the decision to deny is clear, leaving little room for questions of discrimination.

What should your written rental standards include?

At Coluzzi Reals Estate, interested tenants are invited to fill out a short preliminary questionnaire before the full application is provided. Our rental application standards have been refined through years of experience and legal counsel.

Your written rental standards should be objective and specific, stating your minimum requirements for approval. They should also strictly comply with Fair Housing laws.

Your written rental standards should include:

  • Proof of identity
  • Minimum gross monthly salary (ex. Monthly income is = or > 3x rent)
  • Proof/documentation of income (pay stubs, W-2s, etc.)
  • Work history (proof of steady employment for a set amount of time)
  • Minimum credit score
  • Good credit history (no bankruptcies, collections, judgments, etc. in set time frame)
  • References from previous landlords
  • Rental history (from recent years)
  • Number of occupants (check local laws)
  • Smoking/No smoking
  • Pets/No pets (or restrictions on size/type)

Do not include legalese or confusing terminology. Use clear language that’s easy to read and understand. And always have your attorney review your criteria to ensure you are following the letter of the law.

Understand and follow Fair Housing laws

As a real estate investor and landlord, Fair Housing laws should be a top priority for you. Discrimination claims cost you in attorney and court fees, your time, and lead to a ton of stress. And the fines for violating the Fair Housing Act? They’re pretty steep too (up to $21,039 to $105,194 in 2019).

Federal law prohibits housing discrimination based on a person’s race, skin color, sex, national origin, religion, disability, or familial status. Iowa code expands this to prohibit discrimination based on creed, sexual orientation, and gender identity.

What about criminal history? You cannot deny an application based on an arrest without a conviction. Even if there is a conviction, you need to weigh whether it is legal to refuse to rent to an applicant based on their criminal record (see below).

From HUD: “Policies that exclude persons based on criminal history must be tailored to serve the housing provider’s substantial, legitimate, nondiscriminatory interest and take into consideration such factors as the type of the crime and the length of the time since conviction. Where a policy or practice excludes individuals with only certain types of convictions, a housing provider will still bear the burden of proving that any discriminatory effect caused by such policy or practice is justified. Such a determination must be made on a case-by-case basis.”

When should you give rental standards to prospective tenants?

Before you show your property or give a prospective tenant an application, you should have your rental standards in writing.

Make copies available to give to anyone with an interest in renting your property. Do this before you show the property and before they fill out an application.

Pre-screen tenants to see if prospects understand your rental standards and might fit your rental criteria. Make sure you stick to questions about your rental standards and nothing personal that violates Fair Housing laws.

Make your rental standards work for you

You went to the work of creating your rental criteria. So you want to take the extra time to verify the information on tenants’ applications.

Do a credit/background check

Take the time to verify. You will never know if a prospective tenant meets your rental standards unless you verify the information on the application.

Use your rental standard checklist and check off each item as it’s verified.

Get proof of income and employment. Do the credit check and review the information. And make those landlord reference calls.

What should you ask past/current landlords?

    • Did you/Are you renting to the applicant?
    • What’s the time frame the applicant rented from you?
    • How much was/is the applicant’s rent?
    • Did the applicant pay rent on time?
    • What is the address where the applicant resided/resides?
    • Would you rent to the applicant again?
    • Were there any nuisance complaints about the applicant, from neighbors or others?

Be consistent

When you’re consistent with all applications, you will get the right tenants. You also protect yourself against any discrimination claims when you deny an application.

You will always have times when a prospective tenant seems like they’d be great, but they don’t meet your criteria. If you waiver on your standards, it puts you at a higher risk for unsuitable tenants and claims of discrimination

If you feel you must re-evaluate and adjust your rental standards, by all means, do so. But do so legally and across the board, with the new standards applying to all prospective tenants.

Want to learn more about renting your property? Check out Your Guide to the Basic Steps on How to Rent Your House

 

Do you think hiring a property manager is right for you? Coluzzi Real Estate’s Property Management Service is a step above the rest. We have different levels of service to best meet your individual needs. Our property management team has years of experience. Their marketing know-how, processes, and communication will exceed your expectations. Our in-house maintenance crew will help keep your costs low. Whether you need help getting your first tenant, or want complete property management services, our knowledgeable staff will be able to take care of it all. Want to know more? Contact us today.

2019-05-15T10:29:26-05:00

About the Author:

Amanda has lived in the Des Moines area since 1999, where she and her husband have bought and sold a handful of homes over the years, including a recent flip. Amanda enjoys writing, obsesses about personal finance and is fond of looking at houses. She loves sharing useful tips and info to make life easier for anyone wanting to buy or sell a home. In her spare time, Amanda cherishes time with her family, volunteers with IHYC, gardens, hikes, and practices TaeKwonDo.