The Right Reasons to Reject an Applicant
by Robert Cain
Many landlords believe that they cannot reject any applicant for any reason, that they have to accept the first one to come along with the money or risk the grief of a lawsuit or Fair Housing complaint.
Not so.
There are numerous legitimate, businesslike reasons to reject a prospective tenant because of past or present behavior.
1. Unsatisfactory references from landlords, employers and/or personal references. These could include reports of repeated disturbance of their neighbors’ peaceful enjoyment of their homes; reports of gambling, prostitution, drug dealing or drug manufacturing; damage to the property beyond normal wear and tear; reports of violence or threats to landlords or neighbors; allowing people not listed on the lease or rental agreement to live in the property; failure to give proper notice when vacating the property; or a landlord who would not rent to them again.
2. Evictions.
3. Frequent moves. You have to decide what constitutes frequent moves and apply the same criteria to every applicant.
4. Bad credit report. If a report shows they are not current with any bill, have been turned over to a collection agency, have been sued for a debt, or have a judgment for a debt, that is grounds to reject. These do not have to be debts connected in any way with housing.
5. Too short a time on the job. As with frequent moves, you have to decide what too short a time is and apply the same criteria to every applicant.
6. Too new to the area. There is nothing to say you have to rent to people who have just moved to town. Be careful, though, many times these would be excellent tenants and the time and long distance call expense of checking them out could pay big dividends.
7. No verifiable source of income.
8. Too many vehicles. Lots of cars can be a real source of irritation to neighbors and make the entire neighborhood look bad. Chances are, if they have more than one vehicle for every adult they spend a lot of time broken and being fixed. That means they could be in pieces in the front yard.
9. Too many people for the property. Be extremely careful with this. Before the familial status protection clause of the Fair Housing Act, you could discriminate on this basis without fear of any problems. Not any more. Now the same criteria must be applied without regard to the age of the inhabitant. Be sure it is applied equally to all applicants.
10. Drug users. They must be current drug users. If they are in a drug treatment program and no longer use drugs, the Federal Government considers them handicapped and protected by the Fair Housing Act.
11. Pets.
12. Any evidence of illegal activity. You must be able to come up with some kind of satisfactory evidence. I don’t know what that would be, every case would be different. Certainly a letter from the police department warning a previous landlord of their illegal activity and threatening to close the property is considered sufficient evidence.
13. History of late rental payments.
14. Insufficient income. You must set up objective criteria applied equally to each applicant. Insufficient income could reasonably be if the scheduled rent exceeded 35% of their gross monthly income.
For example, if the rent is $600, their gross monthly income must be at least $1714.29. The formula is:
Acceptable income= scheduled rent
income ratio
You can require proof of all income. Be careful, though, if you are willing to accept only one member of a married couple to supply the total dollar income, you must be willing to accept the same of unmarried, co-tenants that share the housing. Under fair housing law you cannot require that unmarried people meet different income requirements than married people.
15. Too many debts. Even if their gross income is sufficient, they may have so many other debts that they would be hard pressed to make all the payments. A rule of thumb might be that all contracted debts, including rent, cannot exceed 50% of their gross income. Contracted debts would be such things as credit card payments, car payments, loans, etc. Those would not be cable TV, water and garbage, telephone, or other utilities.
16. Conviction of a crime which was a threat to property in the past five years. Included in this could be drunk driving convictions, burglary convictions, robbery convictions, and other such misbehavior.
17. Conviction for the manufacture or distribution of a controlled substance in the past five years.
The best way to proceed is to post a list of the acceptable rental criteria and hand it to each applicant. You can use the list above, but under no circumstances is it intended to be legal advice. Check with an attorney who is familiar with the Landlord/Tenant Law before posting or handing out anything like a list of acceptable criteria for applicants.
Laws change constantly, and what you don’t know can and will hurt you.
Excerpted from “Profitable Tenant Selection” by Robert Cain. Available from Cain Publications.
Copyright Cain Publications, Inc., used by permission.
Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter call 800-654-5456 or visit their web site at www.rentalprop.com.
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