Being selective about who you rent to is the best way to keep high-quality tenants. Requiring applicants to meet specific criteria when it comes to credit and references is a must. However, the law is strict regarding how you’re legally entitled to select your tenants and how you handle aspects of the relationship.
When you’re a new landlord, it’s hard to stay on top of the changes; here are five common mistakes to avoid in the landlord-tenant relationship.
- Imposing a blanket ban on all applicants with a criminal history
If you’re new to being a landlord, or you’ve never had an applicant with a criminal history, you need to know the law has been updated. It’s no longer acceptable to place a ban on renting to people with a criminal history.
In 2016, HUD declared that imposing a blanket rejection for all applicants with a criminal history violates the Fair Housing Act. At first glance, it may sound unfair. However, there’s a good reason.
As the National Low Income Housing Coalition (NLIHC) explains, “Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African-Americans and Hispanics.” With race being a protected class, imposing a blanket ban on renters with a criminal history is considered discrimination.
What you need to understand about this new memo is that you can make a decision based on individual circumstances, but you can’t create a blanket policy of automatic denial. You also can’t reject a tenant based on an arrest that didn’t lead to a conviction.
This is where new landlords can easily make a mistake. If you don’t have a property management company handling your rentals, consult a lawyer before making any decisions to reject an applicant with a criminal history.
The United States Department of Housing and Urban Development (HUD) is a department in the executive branch of the federal government.
HUD’s mission is to “create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination, and transform the way HUD does business.”
- Improperly using a tenant’s security deposit
A security deposit is intended to make it easy for you to repair damage to the unit (on the tenant’s dime). Improperly using a tenant’s security deposit can get you in big trouble. Using a tenant’s security deposit to repair severe damage they’ve caused requires following a specific protocol.
If you need to use any portion of a tenant’s deposit to perform repairs, you have two options. In the state of Texas, if the tenant owes you rent when they move out, or did not provide you with a forwarding address, you don’t have to provide an itemized list of deductions.
However, if the tenant has paid rent in full by the time they move out, and has provided a forwarding address, you are required to provide a written description and itemized list of all deductions. This includes what the repair was for, how much it cost, and who performed the repair.
There are tenants who know the law and will look through their lease in order to find holes. Not following security deposit laws can result in having to return the tenant’s deposit, even when you’ve used it for legitimate deductions.
Remember, the law isn’t always black and white. If you skip your responsibility of providing a tenant with an itemized list of legitimate deductions, you’re setting yourself up for disaster. You can’t count on the judge to side with you just because the tenant damaged your property. They might rule against you for violating the law.
- Rejecting applicants with kids
For over 20 years, it’s been illegal to reject applicants with children. Kids can be messy, and cause damage accidentally and deliberately, so some people don’t like renting to families. However, this is considered discrimination and violates federal, state, and many local housing laws.
You can reject a family when the number of tenants will violate the occupancy limit for the unit applied for. In that case, you should suggest a unit with an additional bedroom if you have one available.
Owning rental properties comes with risks and rewards, and the potential for damage is a risk you decided to take. No rental unit can stay in pristine shape forever when people are living in it. You’ll never be able to escape the need to perform repairs. Refusing to rent to families won’t give you an advantage.
- Not working with a lawyer to create legal documents
You can find any legal document you need online. The problem is, these documents are general and you don’t know who wrote them. Documents downloaded from the internet may not have been created by a lawyer, or they could be outdated.
Don’t risk using a document created by an armchair lawyer. The law is confusing, and your contracts need to be precisely worded and tailored to your needs. Housing laws vary by state and city. You need to ensure your lease agreements reflect local and state laws.
Hiring a property management company to screen, select, and manage your tenants is one way to ensure a legally sound lease without having to hire a lawyer.
Property management companies have their own team of professionals working closely with them, including lawyers.
- Not hiring a property management company
If you haven’t considered hiring a property management company to make your life easier as a landlord, it’s time. The advantages are too great to pass up. When you’re on your own, tenants won’t think twice about calling you at 3 am to report a leaky toilet, or a snuffed out pilot light on the stove.
To a tenant who wants to cook rice at 3 am, that pilot light going out seems like an emergency. Even if you’ve set specific hours for tenants to contact you, they’re likely to ignore it. No matter how professional you are, tenants are likely to see the relationship as casual.
A property management company, on the other hand, puts a layer of professionalism between you and your tenants.
Hiring a professional property management company like Green Residential gives you access to a team of industry professionals who will screen potential tenants, handle your maintenance needs, and fill your vacancies to the highest standards.
Contact us today to find out how we can help make your life as a landlord easier.