Use a Solid Rental Application Process
A critical aspect of being a good landlord is the rental application process. Getting a good tenant can cover a lot of mistakes, but a bad tenant will reveal and even exploit those mistakes. Landlords need to be thorough and consider relevant subjects that need to be addressed in the application process. This article provides guidance on what landlords should consider when creating a rental application policy for their rental business.
Application Terms and Conditions
Don’t miss this! Landlords need to create and publish their terms and conditions regarding a person’s making an application for their rental property. The terms and conditions are so important and help to ensure the applicant complies with how you receive, process, and determine applications.
Without solid terms and conditions, many issues or contests could arise, which can cause the landlord many problems. Landlords should have an attorney prepare and review an application terms and conditions agreement.
Rental Selection Criteria
Landlords should create a rental selection criteria that is applied consistently for all rental applications, and that criteria should be published for potential rental applicants to review before making an application. The selection criteria should address important subjects, such as:
- employment history
- income ratio to rent payment obligation
- rental history
- credit score
- criminal history
- past or pending lawsuits against or filed by the applicant
- number of occupants and co-tenants
Setting this standard will help the landlord to avoid accusations of fair housing violations, breach of contract, and other claims and provides an objection criteria on which the landlord can base his decision.
Red Flags in the Rental Application Process
There are “red flags” that should trigger the landlord’s caution in the application process. Red flags indicate higher risks (maybe even fraud or malicious intent) for the applicant in question. The following is a list of common red flags scenarios during the rental application process, but there could be more, so be aware. Red flags include, the applicant:
- misrepresents information,
- insists on moving into the property “now”;
- does not complete the application,
- will not pay the required application fees,
- is hostile,
- strikes through the application and amends the application based on what the tenant believes we need to qualify the applicant, and/or
- states that he cannot sign the lease or pay the initial monies owed as required in our Offer to Lease.
When red flags appear, the landlord should use good judgment and caution before making an offer to lease to the applicant. If the applicant’s responses, provisions, and statements indicate that he may be a problem tenant, the landlord likely needs to deny the application and find another tenant.
Adult and Minor Applicants
A landlord’s rental application policy should provide that all persons 18 and over or emancipated minors must submit a separate and completed application and pay a required, non-refundable application fee. The landlord needs to have all relevant application information for all adults who desire to live in the premises. If one of the co-occupants is an adult and resists or refuses to submit an application, that is a red flag.
If a minor attempts to make an application, the landlord needs to understand that a minor cannot legally enter into a contract, but if the landlord does so, legal issues or issues may arise from that contract, so it is better to avoid the situation altogether.
Application Fees
The landlord should determine what his application fees will be for an application, and the terms and conditions should state that the fee is non-refundable (baring circumstances that may warrant a refund). Application fees should be reasonable based on the administrative burdens placed on the landlord for screening applications and should be the same amount for each applicant to avoid claims of discrimination. Every applicant should pay the application fee prior to the landlord’s consideration for tenancy.
Qualifications, Not “First Come, First Served”
As part of the landlord’s application terms and conditions and policy, Landlords should make it clear that rental applications are not processed on a “first come, first served” basis but rather are based on qualifications using the objective selection criteria.
Do Not Miss Application Opportunities
Until an applicant has been approved and has complied with the landlord’s Offer to Lease (see our article on the importance of the Offer to Lease here), the landlord should consider still taking rental applications, considering that an approved applicant may not satisfy the move-in terms and conditions. That way, if the approved applicant backs out of the deal, the landlord didn’t waste any time or miss any opportunities to consider other applications.
Processing Applications
When you receive an application, process the application timely. Failing to timely process an application and reach a determination could lead to claims of fair housing violations and other claims (e.g. breach of contract, unfair practices, etc.).
Keep in mind, landlords in Florida must timely process a military person’s application. F.S. 83.683(1) provides,
If a landlord requires a prospective tenant to complete a rental application before residing in a rental unit, the landlord must complete processing of a rental application submitted by a prospective tenant who is a servicemember, as defined in s. 250.01, within 7 days after submission and must, within that 7-day period, notify the servicemember in writing of an application approval or denial and, if denied, the reason for denial. Absent a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are complied with.
Processing a rental application should include, at a minimum, the following:
- verifying the identity of the applicant using government-issued identification
- verifying that the application information is complete and accurate
- verify rental history
- verify employment and income
- review criminal background history
- review civil action (e.g. eviction, lawsuit) history
Once all relevant and material information is received, the landlord should review it along with the landlord’s resident selection criteria and also compare the application to the results of other applicants, to determine the best choice.
When it is appropriate to give a status update to applicants, the landlord should consider sending an update to the applicants, to ensure the applicant is still interested in the property and to keep them informed as to your pending review.
Do Not Jump the Gun
Landlords are often eager to place a tenant in their property, even if it means relaxing their standards based on the selection criteria. Don’t make the mistake of going against better judgment. It is better for your rental property to be vacant than to have a bad tenant in the property.
That said, if the landlord determines that he is going give a not-so-qualified tenant in the rental property, the landlord should at least require certain the tenant to provide certain securities, whether that is a higher security deposit, requiring payment of last month’s rent, or getting a personal guarantor who is qualified to cover losses.
Denying, Approving or Conditioning Approval
When the landlord completes his application review, the landlord should make a determination of whether to deny, approve, or require the applicant to satisfy certain conditions prior to approval. Once the determination is made, the landlord should communicate the decision with the applicant in a timely manner.
If the application is denied, the landlord should state one or more reasons why the application was denied, which should be based on the information received in the application process and the selection criteria.
If the application is approved, the landlord should send a formal Offer to Lease to the applicant.
The Offer to Lease should provide for the landlord’s terms and conditions that the applicant must satisfy to become a tenant, very importantly including, paying all move-in monies by a date certain, signing the lease agreement, and taking possession of the premises by a date certain.
The Offer to Lease should state clearly that failure to comply with the terms and conditions shall or may result in the landlord revoking the Offer to Lease. See our article on the importance of the Offer to Lease here.
The Offer to Lease should also contain important information that the Landlord needs to communicate to the tenant regarding basic policies and move-in requirements for the new tenant.
Renewals of Applications
For existing tenants whom the landlord wants to consider renewing a lease term, the landlord should require the tenant to fill out a new rental application prior to his offering to new the lease term. The landlord needs to ensure that the existing tenants still qualify to rent the rental property at the (new) rental rate for the duration of the new lease term and do not have any disqualifying situations (e.g. criminal history, bankruptcy, etc.).
Importance of Application Procedures
The application process is too important to take lightly. Landlords need to have a written resident selection criteria, application terms and conditions, and communication and lease offer templates, and landlords need to use due diligence to screen rental applications to help lower risks and get tenants into their rental properties. Real estate investments are risky ventures, but they are much riskier with bad tenants being placed in them.
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