What Does a Dream Lease Applicant Look Like?

Posted by Teresa on May 24, 2013 under Lease and Rental Agreements, Tenant Credit Checks, Tenant Screening & Background Checks | Be the First to Comment

Okay, that’s a trick question. Why? Because your dream applicant shouldn’t “look like” anything in particular: not male, female, black, white, Asian, Catholic, Muslim, American, Russian or any other pre-determined profile. Using a prospective tenant’s race, color, religion, country of origin, gender, family status or disability to either approve or reject him or her for a lease is against the law, after all.

But there are several qualities that most landlords would probably agree make for a dream applicant:

• She can afford the rent: Smart tenants know how much of their take-home salary should go to their rent, utilities, car payment and other bills each month. Dream tenants only apply for rental housing they can afford.
  
• He has stable employment: A dream applicant is proud to present his employment history, because it shows he’s stable enough to hold down a job for longer than a month.
  
• She doesn’t balk at the tenant screening process: These days, smart tenants know that they will probably undergo tenant screening. And they appreciate the fact that you care enough about who lives in your rental property to require background checks for all tenants.
  
• He has a good credit history: The dream tenant has never been evicted, pays his bills on time and lives within his means. He’s not overextended on credit, is not going to have his car repossessed, and will most likely pay his rent on time each month. And, if his credit history is less than stellar, he has a co-signer lined up.
  
• She has great references: When you call a dream applicant’s former landlords and personal references, they all say good things. And they’re not her friends, co-workers or parents who are pretending to be former landlords!

Remember not to judge a prospective tenant by anything other than their ability to pay the rent and security deposit, and pass a background and credit check. And if you’re lucky, you’ll land a dream applicant who becomes a dream tenant!

When Tenants Want to Sublease

Posted by Teresa on March 10, 2013 under Lease and Rental Agreements, Tenant Screening & Background Checks | Be the First to Comment

Landlords typically include language in the lease that prohibits subleasing without permission. But what exactly is subleasing, when and why would a tenant want to do it, and how should landlords proceed?

Subleasing is different from transferring a lease to another party. In the latter situation, another tenant takes over a current lease and the original tenant is absolved of any responsibility for its terms.

In subletting, the subtenant is granted the rights contained in a sublease, but the original tenant is still responsible for the terms of the original lease. In essence, the subtenant is renting from the original tenant, who is still bound by the contract with the landlord. For example, a subtenant is allowed to live in the unit but must pay rent. If they do not, the original tenant is still liable for the missed rent.

Tenants might be interested in subleasing if they are going away for an extended length of time, but wish to return to their apartment. It wouldn’t make sense to go to the trouble of subleasing for a trip of a few weeks. But if your tenant were planning on traveling through Europe or South America for three months, subleasing is a way to cover the rent without having to break the lease and start over when they return.

Tenants who are interested in subleasing may ask permission, even if the lease states you do not allow it. Remember, it’s always up to the landlord whether or not to allow the sublease. If you decide to allow a tenant to sublease your property, follow these tips for a more successful outcome:

• Write up a Consent to Sublease agreement between yourself or your company and the two parties.
• Include elements such as effective date, the tenant and subtenant’s names, the property address, and the monthly rent.
• Be sure to state that the tenant is still responsible for his or her duties under the original lease.
• If you decide to allow subleases, be sure to create a policy. Don’t let one tenant sublease, and forbid another from subleasing. This could lead to charges of discrimination.
• Be sure your tenant also has a sublease agreement with the subtenant. This is a different document from your Consent to Sublease agreement, and covers the legalities between those two parties. If expectations are not made clear, you could find yourself stuck in the middle of their disagreements.
• Keep in mind that if the subtenant damages the unit, leaves before the lease expires or breaks any other condition of the lease, you may hold the original tenant responsible. He or she can will have to get satisfaction from the subtenant.
• Just as you screen all your prospective tenants before signing a lease, you should make it clear that any subtenants will also be required to undergo tenant screening.

Subleasing can be a hassle, but if you have good tenants whom you want to keep, allowing them to sublet while they’re away can make sense. Remember, it’s completely up to you!

Why Landlords Should Require Renter’s Insurance

Posted by Teresa on February 22, 2013 under Landlord Tips, Lease and Rental Agreements | Read the First Comment

Experienced landlords know: anything can happen in the rental business. Natural disasters strike, vandals damage property, fires break out and thieves are everywhere.

Of course, rental property owners carry insurance protection on their properties to protect themselves from liability and loss. Most policies cover damages and accidents that occur on the property, but not the tenants’ possessions.

Tenant’s insurance, or renter’s insurance, covers personal property in a rental home or apartment against fire, theft, water damage (but not flooding) and vandalism. It also protects tenants in the event that someone is injured in their unit.

It’s a good idea for tenants to buy an insurance policy, but can landlords require it? Absolutely! In fact, many do and for good reasons:

1. Tenants with renter’s insurance will be less likely to try to sue the landlord in the event of a loss or injury, since they have their own coverage.
2. Renter’s insurance can protect rental property from tenants’ misuse or negligence. For example, if a tenant floods the unit, his or her insurance will pay for the cleanup. Those without renter’s insurance could just move out and leave the mess for the landlord to deal with.
3. Having tenants with their own insurance can help landlords avoid claims on their own policies.
4. Renter’s insurance can protect tenants and landlords against claims in case of dog bites from tenants’ pets. The renter’s policy can cover the claim, so the injured party is less likely to sue the landlord.
5. The peace of mind in knowing your tenants are covered in case of a fire or other disaster can be worth its weight in gold. Insurance proceeds can replace clothing, furniture and other necessities, as well as pay for living expenses in case tenants have to temporarily relocate.

If you do require renter’s insurance, make sure it is clearly explained in the lease agreement. It’s also a good idea to be named as a secondary insured, so you can be notified of lapses in coverage.

The cost of renter’s insurance is often less than $20 per month. If you have prospective tenants who balk at the insurance requirement, perhaps they are not qualified to live in your properties!

Holding on to Good Tenants

Posted by Teresa on February 15, 2013 under Eviction, Lease and Rental Agreements | Be the First to Comment

Even in a good rental market, it’s important to hold onto good tenants. What defines a “good tenant?” Well, nobody’s perfect, but if your tenant pays the rent on time, follows your rules and doesn’t cause any problems, that’s pretty close!

But good tenants sometimes fall short, and it can be tempting to draw the line and get rid of them in favor of an even better tenant. Or you might just cross your fingers and hope they move at the end of the lease.

Unless a tenant is breaking the terms of the lease by paying rent late, keeping pets that aren’t allowed, smoking or making too much noise (or any of the long list of grievances landlords have against their tenants), it might be worth your while to let them stay or to entice them to renew their lease.

Keeping good tenants is just good business. Turnover costs money. When a unit is empty, it creates no income. In the meantime, you still have associated overhead costs. Taxes, mortgage expense, lawn service and interest will go on after the tenant leaves. It might not take long to get a new tenant, but then again, it could be a month, two months or longer.

Getting new tenants costs money, too. You’ll need to clean the unit, have the carpets professionally cleaned, touch up the paint (or do a complete repaint) and do all the necessary repairs. Plus, you’ll need to advertise the rental, conduct tenant screening on applicants, and take the time to show the unit.

Empty units look bad to existing and potential tenants. Your other tenants may wonder why others are leaving. Prospects may see “for rent” signs in front of your property too frequently and wonder what’s wrong.

On the other hand, stable tenants mean a stable property. Stability is very valuable in the long run, both financially and in terms of landlord sanity!

While no landlord or property manager should ever allow tenants to pay the rent late, break the terms of the lease or walk all over you, good tenants are worth keeping.

Making Tenants Stick Around for Repairs

Posted by Teresa on December 21, 2012 under Landlord Tips, Lease and Rental Agreements | Be the First to Comment

Our last post was about whether or not allowing tenants to do their own repairs is a good idea (we say, “not”). We’ve also heard about landlords who won’t allow tenants to perform their own repairs, but require them to be present while the repairs are being done.

Of course, a tenant with a leaking dishwasher would need to be notified of the day and time the plumber is coming by. But it’s not the tenant’s responsibility to stick around to let the plumber in and to lock up when he or she leaves.

That’s the landlord or property manager’s job. It’s generally understood that the landlord, building superintendent or property manager is the go-to person when maintenance and repair people need to work on rental units. Sure, it’s convenient if the tenant is at home and can be stick around while the repairs are being done. But think about the liability issues at stake here. Having strangers entering your rental units could potentially put your tenants and their families at risk of harm. You may have no reason to mistrust your contractors, but anything can happen.

Even if your plumber or electrician is the most upstanding person in the community, some people just want to make trouble. It’s possible that a disgruntled tenant could “invent” an issue – and you could have a lawsuit on your hands. Without a witness, it becomes a case of the tenant’s word against the contractor’s word.

It might be convenient to require a tenant to be at home when repairs are being made, but it could also lead to more trouble than you bargained for. It’s better to keep things professional, and handle contractor visits yourself or with the help of your property manager.

Can a Tenant Break a Lease Due to Domestic Violence?

Posted by Teresa on November 7, 2012 under Landlord and Tenant FAQs, Lease and Rental Agreements | Be the First to Comment

A landlord recently asked if her tenant, who claimed her roommate had abused her, would be allowed to break her lease.

Good question! Many abuse victims do not feel safe in their homes, even with protective orders against their abusers. Others, as in the case above, actually live with their abusers. In either case, the desire to move can be strong—even if it means breaking a lease. Should victims of domestic abuse be allowed to get out of a lease before it is up? Should penalties be waived? And who should carry the financial burden, the tenant, his or her roommates, or the landlord?

The first thing a landlord should do is to check state laws, and if applicable, any local statutes that cover domestic abuse and tenant rights. Under most landlord-tenant laws, the tenant cannot be excused from paying rent when he or she breaks a lease before it expires. In some places, the landlord is not required to re-lease the unit, and the tenant is responsible for rent until the end of the lease. In others, the landlord has a duty to attempt to re-lease the rental unit.

Many states have passed legislation giving domestic abuse victims the right to break a lease without penalty or paying future rent. They include New York, New Jersey, Oregon, Washington, Minnesota, North Carolina and others. Check your state’s landlord-tenant laws to determine whether it has passed such legislation. Many require the victim to notify the landlord of intention to terminate the lease. The required notice may be 30 or 60 days. Some require proof of abuse, such as a protective order or police report.

Most landlords realize that having a domestic violence situation on their property is not good. But it’s also true that tenants who move out before their leases are up cause financial hardships. Certain states make it easier on the landlord by requiring the vacating tenant to pay rent for the month in which they leave. In others, they are required to pay two months’ rent.

If you receive such a notice from a tenant, check your states law and proceed accordingly.

When You See Things Tenants Don’t Want You to See

Posted by Teresa on October 30, 2012 under Landlord Tips, Lease and Rental Agreements, Legal | Be the First to Comment

Landlords and property managers have the right to enter their properties, with proper notice to their tenants. Whether it’s for routine maintenance work, pest treatments or safety inspections, it’s not only necessary to occasionally enter a tenant’s unit, but it’s a good idea to do so. You need to know what’s going on in your properties.

During these routine inspections, landlords and property managers sometimes see things that tenants don’t intend for you to see, such as:

• Ashtrays, cigarette butts and lighters.
• Pet supplies, like food dishes and litter boxes.
• Drug paraphernalia like pipes, lighters and syringes.
• Illegal drugs, such as marijuana or cocaine.
• Evidence of drug manufacturing.
• Signs of a business being run out of the unit.

What can (and should) you do when this happens? Can you evict the tenant? If the occupant is otherwise a good tenant, should you ignore it? First, it’s always important to be familiar with your state’s laws regarding grounds for eviction. But if any of the activity you have witnessed violates the terms of your lease, you probably do have grounds for eviction.

If you’d rather not go that route, then it’s possible to wait until lease renewal time comes around, and inform the tenant that the lease will not be renewed. Of course, you’ll need to provide proper notice, according to the terms of the lease.

Reasons to Consider Eviction or Non-Renewal of a Lease

• Liability: Landlords can be liable for criminal activity that occurs on their properties—even if they are not aware of it. Landlords can be liable for injuries that occur as a result of illegal activity. Landlords can be liable for injuries caused by a tenant’s pet—even if they are not aware of the pet. Laws vary from state to state, but why take chances?
• Health: Smoking in units where it is not allowed can affect other residents, including children. Second-hand smoke carries chemicals and carcinogens through vents, doorways and windows. In addition, cigarettes are the cause of accidental fires.
• Safety: Each year, almost 1,000 smokers and non-smokers are killed in fires caused by cigarettes and other smoking materials.
• Fairness: If most tenants follow your rules, such as not running a business out of the rental unit, it’s not fair to make exceptions for someone who ignores the lease. Charges of discrimination could follow.

Strict and equitable enforcement of rental agreements should be every landlord and property manager’s practice. If tenants are conducting illegal or criminal activities or are breaking the terms of their leases, your best move is to get them out and replace them with tenants who will follow the rules and abide by the lease.

And if you need to, amend your lease agreement to include a paragraph prohibiting drugs and other illegal activities on your property.

Need a Good Short-Term Tenant?

Posted by Teresa on October 12, 2012 under Landlord Tips, Lease and Rental Agreements | Be the First to Comment

If you own a property and aren’t interested in renting it out for the long term, there are plenty of potential shorter-term tenants that could be a good fit for your needs.

Consider the following:

• Older people who are retiring and want to rent in an area for a few months before deciding where to live.
• Professionals who fell victim to the housing bubble and lost their houses. Many of these people took a hit to their credit, and need to rent until they can get their finances back in order.
• Career-changers who have moved to an area for a new job and wish to buy, but need short-term housing while they look for a house.
• People who are downsizing or upsizing and have recently sold a house, but haven’t found a new one that works.
• People in transition—whether it’s because of a divorce, illness, death of a spouse or something else. They may not be in a position to make a long-term commitment, but a three- or six-month lease works.
• Adult children of elderly parents who need to live nearby to care for them on a temporary basis.

Certainly, most landlords prefer to have long-term tenants to keep wear and tear down and decrease the hassles of finding new tenants. But if you have a rental property that’s empty, that you may be selling, or that you might move into yourself, there are good tenants out there who need a short-term lease.

With the right kind of homework and some advertising, you can find short-term tenants. Take a look at Craigslist’s “housing wanted” section. And post your listing in the “sublets and temporary” section, with a prominent “short-term welcome” in the heading. Try posting flyers in nearby coffee shops, co-ops and grocery stores.

Be sure to conduct tenant screening on all applicants. Even though the lease is only for the short term, you still need to be sure that your tenant is who they say they are, have adequate credit and income to cover rent and no criminal activity in their backgrounds that could pose a threat.

What to do About Tenants Who Sublet Without Authorization

Posted by Teresa on September 7, 2012 under Eviction, Landlord Paperwork and Forms, Lease and Rental Agreements, Tenant Screening & Background Checks | Be the First to Comment

landlords have faced one of these situations:

• You’re doing a routine maintenance inspection and discover an occupant in the rental whom you’ve never seen before. You ask who he is and he replies, “Oh, I live here.”
• You sign a lease with one tenant. A few months in, she mentions that the rent will be late because her roommate hasn’t paid her share yet. Roommate?
• You live upstairs, your tenant lives downstairs. You notice he hasn’t been around lately, but someone else is clearly staying in the apartment. You ask questions and find out your tenant is away for three months, but he sublet the place to a friend.
• Tenants who live next to one of your rental units call and complain about the three cars that are taking up all the available parking. You reply that only two people live in the unit, but they assure you that three people have been seen regularly coming in and out.

What’s going on? Most likely, your tenant has brought in a roommate or sublet part or all of your rental property to an additional person. If your lease agreement states that no subletting is allowed without your authorization, then the tenant is in violation of the terms of the lease.

The problem with subletting, or adding roommates without your knowledge, is that you have no idea who they are, where the work, if they’ve ever been evicted or convicted of a crime, or if their credit history meets your requirements. Without a chance to perform due diligence, including tenant screening and credit checks—the same tenant screening you do on all prospective tenants—you are at risk of liability for the actions of an unknown person. Plus, your property and business are at risk.

Why would tenants deliberately violate the terms of a lease?

• Maybe they don’t thoroughly read the lease, or forgot what the lease said.
• They may think you won’t catch them in the act, as long as they pay their rent on time.
• Perhaps they think the lease terms don’t actually apply to them.
• Or they simply cannot afford their apartment or house without a roommate.

In any of these cases, you likely have cause to send a cure or quit notice. Of course, check your local and state laws concerning eviction notices. You may want to send a reminder to all your tenants that subletting or adding roommates without your authorization is strictly prohibited. If they want roommates, they must undergo the same application and tenant screening process as everyone else. Explain that this is for the safety of all residents. Keep in mind that treating one group of people differently than others could put you at risk of discrimination charges, so make sure the same rules apply to all of your tenants. Finally, notify tenants that violations are grounds for eviction.

If you do agree to a sublease situation, be sure to put everything in writing. A sublease agreement should be signed by all parties and place in your tenant’s file.

Turning Down Non-Qualifying Tenants

Posted by Teresa on August 31, 2012 under Lease and Rental Agreements, Rents and Deposits, Tenant Credit Checks | Be the First to Comment

How do you say “no” to tenants who don’t meet your lease qualifications? Some landlords have a hard time doing so, especially when the applicants are persistent. Here are a few examples:

1. Don denied an applicant based on weak credit. The applicant offered a bigger security deposit. Now Don is thinking of approving his application.
2. Karen is a landlord in a similar situation. Her non-qualifying applicants offered to pay an entire year’s rent up front. Karen decided to accept the deal and signed the lease.
3. Another landlord reports that a non-qualified couple is pleading with her to rent to them, saying they have not found another rental that meets their needs. The woman has good credit; the man has terrible credit. The landlord is thinking of putting only the woman’s name on the lease, with a substantial cash security deposit.

What is wrong with each of these decisions?

• In the first example, Don is allowing a larger security deposit to cloud his judgment. First, he lives in Massachusetts, where landlords are limited to charging no more than one month’s rent for a security deposit. Next, he is bending his own rules, which is a slippery slope. If a tenant knows he’ll cave on one aspect of the tenancy, they may be likely to push other rules, as well. Is the rent really due on the 1st? Wouldn’t it be okay to move some extra family members into the rental unit? Finally, treating every applicant equally is important to avoid charges of discrimination. Let’s say the next applicant also had bad credit and Don refused to sign a lease with them. They might charge that Don showed preferential treatment to the first tenant and that they are being discriminated against, due to their race, religion, family status, gender, age, etc.
• In Karen’s case, one might think that paying a year’s rent up front would erase any worries about the tenant’s financial situation. However, most strong tenants don’t offer prepaid rent—especially a year’s worth—because they can’t afford it. Karen should ask herself why an applicant with bad credit has that much cash laying around. Have they been scamming other landlords and living rent-free? Have they been evicted? Or are they involved in an illegal cash enterprise? The offer of a year’s worth of rent up front should be a red flag.
• In the third example, this landlord is asking for trouble. All adult residents should be put on the lease and held liable for the terms of the lease. What guarantee does the landlord have that the female will always be responsible for the rent? What if the couple breaks up and she moves out? The landlord will have a resident living in the rental unit without a lease.

Experienced landlords know that sticking to your standards and leasing only to solid tenants who meet your criteria are important steps in building a successful rental business. If denied applicants don’t hear your “no,” just say it again. And louder. And then, hold out for well-qualified tenants. Tenant screening on every applicant, with minimum qualifying credit scores, is a landlord’s best practice.