Talk to any experienced landlord or Philadelphia property manager, and you'll hear that the right tenant can turn owning and managing a rental property into a pleasant and profitable experience, while having the wrong tenant in place is likely to lead to untold headaches, financial losses, and more. Tenant screening is a pivotal step in the leasing process, ensuring you end up with reliable individuals who will take good care of your property and pay their rent on time. It's not as easy as running a credit check and sending out an approval or a denial. You need to do some digging, but you need to do that digging in a way that's legally compliant and fair. You don't want to skimp on the screening, but you don't want to delay a lease offer by combing through decades of someone's rental history, either. Finding the balance is an art, and we're talking about the art of tenant screening today. Here's a playbook for landlords who aren't working with experienced property managers, and need to find tenants on their own.
Know the Rules: Understanding Fair Housing and Tenant Rights
It's very easy to make a legal mistake when you're screening tenants. Unfortunately for landlords, those mistakes are often very expensive. Before you put out an advertisement, schedule property showings, or begin reviewing applications, it's crucial to understand the fair housing laws in Philadelphia and Pennsylvania. These laws prohibit discrimination based on:
- Race
- Color
- National origin
- Religion
- Sex
- Familial status
- Disability
Think you'd never discriminate against a potential tenant based on those factors? We believe you. But, sometimes discrimination shows up in ways that you would never expect. The language you use in a listing, for example, can be perceived as discriminating against a protected class. Familiarize yourself with the specific federal, state, and local laws that will affect your tenant screening process. Ignorance is not a valid defense in these matters, so due diligence here is non-negotiable. Be aware that the application process, such as the criteria used to approve or deny an applicant, the interviews, and even the specific questions asked, can be scrutinized for any signs of bias. Always treat all applicants equally and base decisions on business-related criteria. We strongly recommend that you establish a consistent set of rental criteria that every applicant must meet in order to be approved by you. When this is written, documented, and provided to each applicant, you can confirm that every application is treated objectively and measured against the same criteria. This criteria should outline the factors you will consider, such as:
- Applicant's credit score and history. For example, you can establish a specific credit score that's needed.
- Eviction history. You can have a zero-tolerance policy on past evictions or require that there are no evictions in the last 10 years.
- Income requirements. Industry standards say tenants should earn at least three times the monthly rent, but some landlords will only require two or two-and-a-half times the monthly rent.
- Rental history
- Criminal background checks
When applicants know the rules from the start, they can assess their own qualifications to save time and prevent disputes later on.
Request and Review Applications
When you request tenant applications, make sure they contain all necessary information. This may include personal details, rental history, current employment and income, and references. You'll need every applicant who is 18 years of age or older to complete an application, and you'll also want them to sign that application, providing you with permission to check their personal and financial information.
Run Credit and Background Checks
A credit check can give you insight into an applicant's financial responsibility, while a background check can reveal any past criminal behavior that may be a concern. While these checks are valuable, they must be used judiciously and in compliance with the law. In Pennsylvania, you can deny an applicant based on their criminal background. Philadelphia does not prevent it, either.
Verify Information and Check References
Don't just take an applicant's word for what's on the application. Verify the information on their application independently whenever possible. This might mean contacting their employer to confirm their job status and income or reaching out to previous landlords to get an idea of their rental history. Checking references can provide valuable insights that aren't apparent from a written application.
Communicate Screening Results Clearly
Once you've screened an applicant, communicate the results to them in a clear, timely manner. It's not fair to leave them hanging, wondering if they're approved or not. Put the decision in writing. This can be an email. If an applicant is denied, it's their legal right to know the reason why. Providing this information, as well as any next steps in the process, shows respect for their time and effort in applying. When you're denying an applicant because of their credit, you need to provide specific language in your denial letter that complies with the Fair Credit Reporting Act. Handling personal information is a serious responsibility. Keep applicant data secure, whether it's stored digitally or on paper. Use encryption, secure databases, and proper disposal methods to protect tenant information from leaks or unauthorized access. In the event that a discrimination claim or other legal issue arises, having thorough documentation can be crucial in defending your actions. Keep records of all communications and decisions made during the screening process, including any follow-up steps taken. Tenant screening is not only about finding reliable renters, but also about following fair housing regulations and protecting yourself from potential legal issues. By understanding and adhering to these tips, landlords can navigate the screening process with confidence and find the best tenants for their properties. Remember to always stay educated on fair housing laws and regularly review and update your tenant screening policy to ensure compliance. With proper tenant screening techniques, landlords can minimize risk and maximize success in managing their rental properties. We can help you find a well-qualified tenant with our exceptional screening tools, resources, and technology. Please contact us at Innovate Realty. We work with investors of all experience levels in the greater Philadelphia metro area as well as surrounding suburban areas in Montgomery, Chester, Burlington, and Delaware County, to the Delaware River.
