Successful property management begins with good documentation, and most landlords will start a leasing arrangement with a rental application. A rental application allows a landlord to organize and evaluate applicants for a piece of property, and to use the information provided to run credit and background checks on those individuals. Collectively, this information can be used to select tenants who will pay rent promptly and care well for the property. A landlord can also shield himself from claims that he selected applicants for improper and discriminatory reasons.
As a landlord, you need a document you and your prospective tenant can trust. Your tenant needs assurance that he or she will not be asked unnecessary or illegal questions, and will be considered fairly for the available rental. You must be sure the applicant will be a good tenant, willing and able to make rent payments and to treat your property with the same care you do. The enclosed document, together with a reliable real estate lease, reduces your liability risk and helps protect your investment. It also builds a strong foundation for the ongoing relationship between you and your tenant; you will both be able to proceed with confidence of your mutual respect and trust, and start the rental off on the right foot.
2. Dos & don’ts checklist
A rental application is not a lease. You are not obligated to rent to an individual simply because he or she has completed an application. Similarly, a potential tenant who has completed an application is not required to rent the property.
- You may never discriminate among your applicants on the basis of race, color, national origin, ancestry, sex (gender), sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance or housing subsidy, or children (with certain limited exceptions).
- You can request a deposit with the application if you want to assess the seriousness of prospective tenants about your property. However, this will also add more complication and confusion to the application process. Applicants may mistakenly believe that the deposit guarantees acceptance. It may be easier to accept applications without deposits, but it’s good to consider this as an option if frivolous applicants become more common.
- After an applicant has completed the application, ask to see some form of picture identification (e.g., driver’s license, passport, etc.). Make sure that any identification given corresponds with the responses that were written on the application.
- A good way to evaluate whether an applicant will be able to pay the required rent is to calculate about 30% of his or her monthly salary. For example, imagine that you are asking for $1,200 per month in rent. According to this formula, you should only consider candidates who are earning at least $4,000 per month.
- After the application has been signed, it’s a good idea to perform a thorough investigation of the applicant and his or her background. Note the paragraph above which the tenant signs the application: the text indicates that he or she is consenting to a credit/criminal check and investigation. There are a number of online agencies that will conduct this search for a minimal fee. Be careful: under federal law, you may not obtain a credit report on an applicant until you have their signed authorization. If you attempt to do this, you may face steep fines and possible imprisonment.
- Requiring all prospective tenants to complete a rental application can help insulate you from lawsuits alleging discrimination. If you are accused of rejecting someone’s application based on race, religion, or another prohibited category, you will be able to show the applications that you received and have written documentation supporting your selection.
- Although you should feel free to customize the application to suit your needs, the information requested in the form may be helpful to you if you need to collect rent or seek late rent payments. As you are reviewing submitted applications, it’s a good idea to consider this perspective. Will the prospective tenant have sufficient capital or property to make rent payments? Stable income? Too many liabilities? A little deliberation up front could save time and money down the road.