Are landlords required to install new flooring for disabled tenants?

1Question: I am a property manager at a low-income apartment complex. Last year, a tenant in a wheelchair told me that she needs the carpeting in the unit changed because her wheelchair gets caught in the fibers, making it difficult for her to move forward. We understand that we have responsibilities to accommodate people with disabilities, so we replaced the carpet with laminate flooring. The project cost us over $1,500.

Now another tenant who uses a walker brought us a doctor’s note saying that she also needs laminate flooring. I have seen her around the property talking to the tenant whose floors we did, so I know they are friends, and I know that’s where she got the idea to make this request. Do we have to replace the floors in her unit as well? What if all the tenants want new floors?

Answer: What your tenants have asked for is a reasonable modification — a structural change that gives an occupant with disabilities full enjoyment of the premises.

Although housing providers generally do have to allow reasonable modifications needed by persons with disabilities, tenants must pay for these modifications themselves unless the housing provider receives certain kinds of federal financial assistance. In that case, the housing provider has to pay for the modification unless doing so would create an undue financial and administrative burden.

The fact that you are a low-income housing provider and paid for the first modification may suggest that your complex does receive some form of federal funding, but you should discuss the matter with someone familiar with the funding at the complex and the requirements connected to that funding.

Neither the fact that the two tenants are friends nor the fact that you replaced the flooring in the other unit at your own expense changes your responsibilities under the law. This new request should be evaluated on its own merits: If the tenant has a disability and if the modification is necessary to allow her full enjoyment of the premises, then you must permit the modification.

This is true for every tenant who makes the request, regardless of how many there may be. But remember, of course, that if the tenant must pay for the modifications, the financial burden of replacing the flooring falls on the tenant, rather than on you. And if you do receive federal funding, if and when the cost of replacing the carpet with laminate flooring for multiple tenants rises to the level of an undue financial burden, you may not be required to grant further requests.

A final note, if the tenant would have to pay for the modification herself but cannot afford to do so, she may be able to get assistance from a nonprofit or charity. Contact a local disability rights agency to see what programs might be available in your area.

Source: latimes.com

7 Things to Include in a Rental Lease Agreement

1You’ve purchased a rental property, and now you’re figuring out how to get started as a landlord. Failing to specify all of your requirements and expectations in the lease is one of the more common landlord mistakes.

Smart landlords know the best way to safeguard their investment from potential tenant trouble is to craft a solid rental lease agreement that – at a minimum – includes these key things:

1. The basic clauses. Every rental lease agreement must list the parties to the agreement, which would be you and the tenant, along with the property’s address. You also want to state the term of the lease, which could be month-to-month starting on the first with a particular end date or an automatically continuing lease that remains in full force and effect.

2. Security deposit clause. Your lease should require the tenant to put up a security deposit that matches one month’s rent or more, depending on the value of furnishings and repair costs if something goes wrong. Some states require the landlord to place the tenant’s security deposit in a separate interest-bearing account and, at the end of the lease, return the deposit plus interest to the tenant, less any damages. Make sure you understand the laws and regulations in your area, and to save time and money over the long term, have your real estate attorney review your lease agreement to ensure that it follows the law. Security deposits can be a problem if not handled correctly.

3. Maintaining the premises. The lease should specify that tenants are required to maintain the premises, abide by noise control rules and not change the locks without your written approval. You will want to itemize the appliances (and any furniture, if applicable) that are part of the lease, and note their condition and any other special considerations. Don’t expect a tenant to follow oral requests, such as not parking in the driveway. All requirements must be spelled out in the lease agreement. Also note whether the tenant or landlord will be responsible for utilities. Take the time to clearly write out the details of your rental agreement.

4. Warning of concealed defect. In some jurisdictions, you have a legal duty to warn of a concealed defect known to you, or a defect that it is reasonable for you to know about. If you know the deck is crumbling and you fail to warn your tenant, then you may find yourself explaining the situation to a judge. Better to disclose the known defect in the lease and, best of all, fix it before the tenant moves in.

5. Subleasing clause. At some point, most landlords have a tenant who wants to sublet the apartment to a friend or stranger. To avoid trouble, make sure your lease agreement includes a subletting clause that requires the tenant to obtain your written permission before turning the rental over to someone else. When the tenant asks to sublet the property, you will be in a position to decline or accept their offer. But heed this caveat: If you want to agree to having the new tenant move in, then it’s best to end the original tenant’s lease and start the process from scratch with the new tenant. You should go through the entire background check with the new tenant, including a new security deposit and lease. Do not put yourself at risk by trying to enforce your original lease agreement against a new tenant who was not a party to it.

6. Termination. The best practice is to know your jurisdiction’s rules on terminating a lease and include those details in your rental lease agreement so your tenant will not be surprised. Terminations occur at the end of a non-continuing lease and also when there is an eviction. Evictions can be tricky; you may think you know the rules, but if you improperly notify your tenant of a coming eviction, you may find yourself on the wrong end of a lawsuit. You can find free eviction paperwork online, but if you are planning to evict a tenant, you would be wise to consult with an attorney.

7. After the tenant leaves. Would you ever hold a tenant’s personal property for unpaid rent? In some states it’s against the law for a landlord to confiscate a tenant’s property and demand rent money in return. Other jurisdictions consider the property abandoned and allow the landlord to dispose of the items. Most states require a landlord to hold the tenant’s property for a short period of time and give notice to the tenant, and some allow the landlord to claim a storage fee for the hassle. The key is to check your local laws and spell out in the lease what you plan to do with personal property left behind by the tenant.

Include these important clauses in your rental lease agreement and you will be well on your way toward building a successful real estate investment business.

Source: zillow.com

North Carolina General Assembly Passed Senate Bill 326

1On July 1, 2016, the North Carolina General Assembly passed Senate Bill 326.  SB 326 modifies local government law regarding the inspection of residential buildings. The bill includes provisions that deal with reasonable cause for inspection, property permits, and allowing the sheriff and city police to assist a landlord in addressing crimes committed on private property. This bill also eliminated the ability of municipalities to operate a rental dwelling registration program as of January 1, 2017.  Therefore, as of January 1, 2017 the City of Raleigh and the Town of Garner Rental Dwelling Registration program will be dissolved.  Renewal notices will not be mailed out in February 2017.

Landlords, please remember to cancel any automatic bill pay schedules you may have set up with your bank for the rental dwelling registration program.

If you have any questions, please contact:

City of Raleigh:
Donna.Schaeffer@raleighnc.gov
City of Raleigh

Town of Garner:
(929) 773-4433
Town of Garner

10 Ways to Be a Great Landlord

realtor-keys-couple-home-landlord-300x214It is upsetting when we get tenant complaints as a landlord.

It is hard work renting apartments or homes to tenants and it takes people skills and management skills. Many times our goal as a landlord is to simply avoid tenant complaints. But there are principles, if properly used, that can reduce or eliminate tenant complaints. Do you know what it takes to be a great landlord?

By Richard Montgomery

Reader’s Question – What makes a great landlord?

Question: Monty, My husband and I own about 75 units in 25 plus buildings.

He has a good day job and I manage the apartments. We have been expanding slowly for over 20 years. This is not easy work. Over the years we have had tenants occasionally complain about different things but we always shrug it off as sour grapes or “they don’t get it.”

Yesterday we got a complaint letter that several tenants signed, which is upsetting. What makes a good landlord?

Answer – Managing apartments is hard work

Monty’s Answer: Owning and managing apartments is very hard work. The environment and working conditions vary considerably based on location and size of the city. As a portfolio expands the management responsibilities expand as well. Management practices must be tailored to the environment, the clientele and working conditions. That said, there are a number of principles, if properly utilized, can reduce or eliminate complaints. This leads to less turnover, less management intervention and happy employees and occupants.

No. 1 – Treat tenants respectfully

We all know high maintenance people. Whether late with the rent, a sharp tongue or simply unreasonable, being respectful can be difficult. There are many resources to learn more about techniques to employ when dealing with difficult people. Getting More is a book that teaches readers how to negotiate respectfully. The National Association For Community Mediation is a place where you can take classes on dealing with difficult people, and YouTube.com has many videos on the subject.

No. 2 – Be true to your word as a landlord

As an example, when you say it will be fixed on Tuesday, fix it on Tuesday. This may sound more difficult to deliver on, than it actually is to deliver. This involves work on the part of the landlord to identify a person, or multiple people, who can deliver on fixing the problem right the first time . They have to be organized and talented enough to stay on a schedule. It is creating a mindset to build an organization the right way. Every person involved in that “being true to your word” process must understand it and be trained and supervised to be able to carry it out.

No. 3 – Keep your property in top shape

Preventive maintenance, timely repairs by qualified people and utilizing products best designed for the job will pay dividends. If paint peels, paint it. When an air conditioner breaks down, fix it or replace it. If you have no funds to do this, then something is wrong. Do you have a replacement repair fund you pay into monthly?

No. 4 – Be picky about accepting tenants

It is always tempting to “take a chance” on a prospective tenant as you want the income. On the other hand, if they move in and become a collection problem you have gone backwards. Review your rent-up procedures and alternate background check services. Most landlords will occasionally get stuck. It is part of the business, but if it is happening too often, you can improve. Also stay up on the latest guidelines from the U.S. Department of Housing and Urban Development.

No. 5 –  Run it like a business

Many issues that affect some landlords can be minimized. An example is a move-in/move-out report, using it will be a breath of fresh air. A visit on move-out day can often reduce problems before they happen. If the tenant expects you to be there and understands you are going out of you way to help them get their security deposit back in 3 days instead of 2 weeks, most will appreciate it. Include your house rules as a part of the lease and let them know before they sign a lease that you enforce them.

No. 6 – Train and manage employees and contractors closely

When bringing a new employee or new vendor into a relationship with you and your company, an orientation booklet and specific training to set the desired expectation is vital. It is even better if that conversation takes place as part of the interview process. One of the most common complaints in apartment management is often directed toward a specific employee.

No. 7 – Pay your vendors on time

The old saying “fast pay makes for good friends” is an important part of holding a good team together.

What kind of a message does a contractor or employee receive with slow pay when you really need them?

No. 8 – Stay close to the business

It is your responsibility to know how your buildings are being managed.

Being on the premises regularly and talking to employees, contractors and tenants allows you to keep a pulse on the happenings.

  • Are the neighbors getting along?
  • Did the contractor finish painting the floor as agreed?
  • Did the Jones’ move-in go as planned?

No. 9 –  Be fair, consistent and follow through on what you promise as a landlord

When this principle is in place the tenants, employees and contractors know they can expect this level of treatment in a relationship with you and your company.

It is natural that they will reciprocate in kind.

While the tenant does not have the same motivation as the others, it is your job as the leader to mentor and teach your employees to live the principle.

No. 10 – Think like a steward

A steward is defined as someone who manages another’s property.

The idea is to see yourself as a temporary custodian who will diligently care for the property until such time as it is passed to the next “steward.”

And, you want to pass it on as a better property than when you found it.

The examples provided with each of these 10 ways to be a great landlord tips are just one of many examples that could be applied.

Conclusion

The examples provided with each of the 10 examples of how to be a great landd are just some of the many examples that could be applied. It is not easy, but if a property owner practiced each and every one of the ten principles, it would be extremely out-of-place for a tenant or tenants to find a reason to complain.

Source: rentalhousingjournal.com

What They Don’t Teach You About Evictions in Landlord School

Eviction-OrderIf you’ve ever had any training buying rental properties, investing in real estate or taken actual training on being a landlord, one area they often either gloss over or entirely skip is the part about evictions. It’s easy to understand why, it’s not a very glamorous topic and it’s right up there with fixing toilets at 3am in the excuses for not being a landlord handbook. Yet knowing the rules, and following some simple steps in advance, can often mean the difference between making an eviction quick and cost effective, versus drawn out and costly for you the landlord.

Unfortunately, I can’t help you with the rules. The problem being that rules for evictions are all over the map. Some areas allow a 3-day notice, some a 7-day and others 14. Some places have landlord tenant courts, others call them tribunals and others picked letters out of a hat to create unpronounceable acronyms for a service landlords can’t understand!

Then there’s the rabbit hole of what to do with all the tenants belongings if you successfully evict them. While I don’t know of any areas that allow celebratory bonfires, there are usually specific rules about what to do with items if they exceed certain value amounts, how to store them (if you are allowed to store them) and how to dispose of them.

None of which is important until that dreaded day you discover you have a problem tenant and suddenly discover yourself over loaded with “what ifs”.

  • What if the tenant doesn’t pay?
  • What if the tenant destroys my property?
  • What if I can’t collect and much, much more.

Look, understanding your local rules should be one of the first things you learn, before you become a landlord, yet it’s often something we learn the hard way as we’re dealing with the additional stress of a problem tenant.

So let’s talk about what you can do to get up to speed, and why!

Lesson One – Leases

Probably the most important reason to understand the rules is to allow you to customize your leases so they help you work within the rules and give you the most power. Hold it, you do have a written lease don’t you?

Perhaps this is where I need to share some of my background.

I’ve been a landlord since the early 2000’s and I’ve had around 1,500 tenants during that time. Yes, 1,500 which is crazy when you see the number, but the positive is, it also has given me an over abundance of experience in evictions.

Maybe it’s just a sign of how crazy Real Estate folks can be, but I actually see the positive about this experience.

You see, I turned this experience into a benefit for other landlords as well as myself as I created a website for the area I’m in that walks landlords through the eviction process.

This has helped me see the same problems over and over and over and the biggest being no written lease, or a generic lease that allowed tenants to walk all over the landlord due to ambiguity or simply being too generic.

You need a written lease that allows you to enforce your rules within the local rules.

Whether this is making sure it contains a no smoking clause (where applicable), a no pets clause (again, where applicable) or specifics about what happens if they bounce a check, fail to pay, or skip out. Again, all worded and slanted to ensure you have the necessary power where needed.

So first lesson, if you don’t have a written lease, contact a local landlord association, a lawyer who specializes in Real Estate and rental issues or pick up some of the forms available here on AAOA.

Second Lesson – Evidence

The second problem landlords run into is not having enough hard evidence of a problem when it comes to an eviction.

As part of my eviction site, I also offer consulting services that walk landlords through the steps they need to successfully evict a tenant and as heart breaking as it can be sometimes I often end up telling landlords they won’t be able to get an eviction with the information they have.

I have to tell them that after months of stress and headaches, they’ll have to wait another month or two to have enough evidence to obtain the eviction they so desperately want and need.

And so begins lesson two!

Document, document, document!!!

If you don’t already have a tenant journal get one. It can be a simple notebook, an app on your smart phone, or some other method of recording interactions with your tenants. From the innocent call about a broken appliance to conversations about late payments you need to record it all in your journal along with dates and times.

These notes can become your timeline and your beginning pile of evidence. They can show a history of behavior from continuous late payments to a trail of lies and deceit. All which become incredibly handy in many hearings.

The extra benefit is you also come across as a professional landlord versus a run of the mill landlord which makes a huge difference in the eyes of a judge, hearing officer, tribunal or whomever you may face when evicting a tenant.

And any edge you can get is crucial, you’re dealing with a considerable investment when you own a rental property and you need to remember that.

One additional tip to include with this is to follow up any phone conversations with your tenants with written notice addressing what was talked about.

As an example of this, if your tenant calls explaining they need a couple extra days for rent and you agree to this, follow up with an email, a written notice dropped off at the place or both covering off what was discussed and any timelines agreed upon. And also document it in your tenant journal.

Third Lesson – Resolutions

The third lesson about evictions is to work with your tenant to resolve any issues, but make sure you have a line in the sand and an understanding of repercussions, your actions going forward and the end results.

This may involve providing extra leniency for a long standing tenant that has fallen behind, but with a firm understanding that you will take action if it continues.

Or it may require you to make decisions that while unsavory at the time are better long term for you. I’m not talking about breaking laws, shutting off utilities or removing front doors here either.

I’m talking about paying a tenant to leave, refunding full deposits even though tenants have left messes or not charging or going after any judgments in an effort to expedite getting control of your property back and having the problems go away.

You need to understand with evictions that your ultimate goal is to resolve the problem and get control of your property back. If it costs you $1,000 so your problem goes away and you can get a new paying tenant within a week or two it may well be worth it.

If you have to eat the cost of cleaning up after a tenant at your expense, but you have control of your property and they are gone, it may be worth it.

If you have to pay someone just to leave two weeks early, it could save you a month or two of lost rent on top of additional costs for repairs and hearings, so again it may be worth it.

Bottom line, you need to decide whether the short term pain of giving back a deposit, refunding a month’s rent or even paying someone to leave will save you weeks or months of additional headaches and expenses!

Just make sure if you do have to pay them, no money changes hands until they are out!!

Final Lesson – Learn Before You Have To

Finally, learn the local eviction systems before you need them.

Learning as you go can work for many different situations, but during the stress of an eviction, when your property that you worked hard for is potentially at risk of damages and destruction and when your bank account is spiraling downwards due to non-payment and unexpected costs, you’re probably not in the best position to blindly learn as you go…

If you have at least a basic understanding it can help pave the path moving forward and if you follow the first several lessons at least you will be more prepared if you do have to go down an eviction route.

The Ultimate Lesson Learned from Evictions

To really wrap this up, I need to share with you the most important lesson you need to know as a landlord. And unfortunately this is the lesson that gets reinforced after you’ve gone through your first eviction.

It’s far easier to let a bad tenant in, than it is to get a bad tenant out…

Think about that.

If you understand that and really let it sink in, it will change how you operate your landlord business.

It means you’ll put far more effort into screening your tenants, into not settling for someone just to get the burden of an upcoming mortgage payment off your back and into actually completing your due diligence properly.

I’m talking about checking all references, completing credit checks and verifying the tenants ID which are all parts of a solid tenant screening process. All steps to save you headaches down the road.

Yes, it’s definitely more upfront work, but as I mentioned skipping this can lead you right back to that Ultimate Lesson:

It’s far easier to let a bad tenant in, than it is to get a bad tenant out…

Bill Biko – “The Educated Landlord” has been an active landlord for well over a decade and during that time has packed more enough experience in for dozens of regular landlords. From rooming houses, to rent to owns, furnished rentals and“regular”rentals, Bill has had around 1,500 tenants which has made him a master of systems and a master of evictions. To find out more about Bill or to get access to additional tips, articles and Bill’s “7 Questions Landlords Must Ask” visit www.TheEducatedLandlord.com

What Can I Deduct or Withhold From a Security Deposit?

53555741_s-300x200The rules for handling and deducting from a security deposit are commonly misunderstood. This article will clarify the legitimate reasons for withholding all or part of a security deposit from a tenant.

Best Practices for Withholding a Security Deposit

It’s a common scenario: your tenant pays you a security deposit before moving in, which gives you some peace of mind that the money will pay for certain items or damages when the tenant moves out.

When move-out day arrives, the tenant says they left the unit spotless, but the floor wasn’t even swept. Or worse, there are broken windows, an unidentifiable sticky liquid all over the fridge, and a clogged shower.

The general rule is that a landlord or manager can only withhold deposit monies for actual damages, material or financial. Meaning, you can deduct money if they owe you past due rent and fees, or caused damages beyond normal wear-and-tear.

State laws vary greatly, but there are generally some statues that regulate the basics such as:

  • whether or not you must put the money into an interest-bearing account,
  • if you can or cannot commingle such deposits with your personal or business accounts
  • what you can or can’t deduct from a tenant’s security deposit
  • the timeframe in which you must return the deposit or supply written notice of why you aren’t returning all or part of it.

Things to Remember:

  1. Always fill out an “Inventory/Condition Checklist” before the tenant moves-in so that there is a baseline for comparison.
  2. Provide the tenant with an itemized receipt of any deductions before returning any money.
  3. Take plenty of pictures of the damages and overall condition after each move-out.
  4. Follow your state’s rules and timelines for returning the deposit.

Let’s talk about some basic general rules for deducting and withholding deposits.

Breaking the Lease

You can’t automatically keep a deposit just because your tenant abandons the lease or breaks a rule in it. Again, you must have actual damages to offset your claims against the deposit.

If the tenant leaves you high and dry with unpaid rent, utility bills, late fees, and parking fees, then you could withhold some or all of the deposit to cover the debt. A lease is a contract, and if the tenant breaches it, you can take them to court if they don’t pay.

Practically speaking, unless the debt is multiple thousands of dollars, going to court is often more trouble than it’s worth. Even if you receive a judgment, you still have to collect it from the former tenant. Most landlords opt to keep the security deposit and look for a suitable new tenant.

Abandonment and Unpaid Rent

If the tenant abandons the lease and stops paying rent, you almost certainly will have a claim because it takes a few weeks, if not months, to find a replacement tenant. Your previous tenant would still be responsible for rent during that time, and if he/she didn’t pay, then you could withhold the deposit to offset the unpaid rent, and sue them for any remaining balance.

Note: if you keep a month’s worth of rent from the deposit, but don’t actually have a vacancy that is a month-long, then you would need to give back any overlapping funds.

Since most security deposits cover only one or two month’s rent, it’s important to start eviction proceedings as soon as possible if the tenant makes no attempt to pay.

If you’re not familiar with the eviction process in your area, hiring an attorney is wise. It’s not okay for the tenant to forego paying the final month’s rent under the assumption you’ll apply the security deposit to it – so don’t use the deposit for last month’s rent.

Normal Wear and Tear

Every property suffers some normal wear and tear, and you can’t deduct that basic upkeep from the security deposit. If the tenant cleans regularly, then the landlord is always responsible for normal wear and tear.

The general rule of thumb is that a landlord is not allowed to deduct from the tenant’s security deposit for “normal wear and tear”.

Normal wear and tear typically includes the following:

  • General rug wear
  • Sun-faded wallpaper or paint
  • Nail holes in walls from picture hangings
  • Bathroom mirror desilvering
  • Appliances no longer working, but not due to misuse
  • Warped windows or doors, due to temperature or age
  • Dirty draperies or blinds

Texas, as well as other states, define “normal wear and tear” as:

“…deterioration that results from the intended use of a dwelling…but term does not include deterioration that results from negligence, carelessness, accident or abuse of the premises, equipment or personal property by the tenant, by a member of the tenant’s household or by a guest of the tenant.”

Meaning, if a tenant was simply living in the property the way it was intended, and did not damage anything by means of abuse, negligence, accident, guests, animals, or lack of normal cleaning, then a landlord has no right to any deposit deductions. Since HUD doesn’t have an official list of acceptable deductions, landlords have to go by their state rules (if any exist), personal experience, and their gut feeling.

Property Damage

If your tenant or their guests cause excessive damage to the property, you can use the security deposit toward repair or replacement. Some damage is fairly obvious, such as big holes in the wall or floor, or broken fixtures. Other conditions, not so immediately apparent, are also deductible from the security deposit.

These could include but not limited to:

  • Missing smoke or carbon monoxide detectors
  • Flea extermination, if a pet lived on the premises
  • Broken or missing window blinds
  • Appliances broken due to negligence.
  • Dirt and filth as a result of in adequate clean
  • Any damages caused by lack of common sense or improper use (like sliding down a stair handrail)

Even if you find some excessive damage after the deposit was returned, you can still send an invoice to the tenant. However, the chances of receiving that money is slim to none.

Cleaning

If you have to pick up and dispose of a few minor items after the tenant is gone, that’s not grounds to withhold part of the security deposit. And quite honestly, it’s just not worth the effort to deduct money for a few items. However, if the tenant left junk and trash all over the place, or food rotting in the fridge, that’s a different story.

Many leases specify that a tenant should leave the property in “broom clean condition,” or terms to that effect.

I’ve never really liked this term because a tenant could potentially sweep the apartment, but leave the stove, fridge, and closets a complete mess. Without more specific language in the lease, you’ll eventually regret using the term “broom clean”.

Painting

Many landlords repaint the interior of the rental property to attract a new tenant. It’s routine and usually performed every few years, so you can’t deduct the costs of hiring a painter or purchasing paint from the security deposit.

However, if the tenant painted the walls some hideous shade or drew “art” on them, the cost of repainting is deductible – but only for the affected rooms. The same holds true if the repainting is necessary because the tenant or guests smoked in the dwelling, causing staining on the walls.

Likewise, if the tenant painted without your permission (lease clause required), you would be able to deduct the cost of a painter and supplies to return the wall to its original color compared to when they moved in. Although, if the paint color is neutral and nicely executed, then you might want to consider thanking your tenant for painting!

Provide Receipts

Make sure to document all the necessary repair work to prove your expenses. In most states, such documentation is required above a fairly nominal monetary amount ($126 in California).

If you deducted money and the funds are unsubstantiated, the tenant may take you to small claims court. Many times, the tenant can be awarded 2-3 times the deposit amount if you wrongfully withheld anything.

Source: landlordology.com

HUD Issues New Guidelines On The Use of Criminal Records In The Rental Screening Process

1On April 4, 2016 the U.S. Department of Housing and Urban Development (HUD) dropped a bombshell on owners and managers of residential rental properties in the U.S.

HUD’s Office of General Counsel published a 10 page guide entitled “Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real-Estate Related Transactions.”

This guide essentially changes the rules as we currently know them with regard to rejecting a rental applicant based on their prior criminal history. I highly recommend that all of you read the document itself — many times in fact — as this is a very important change and this issue is not going to go away.

This Policy Is Applicable To All Landlords

HUD’s guide applies to ALL HOUSING PROVIDERS. I repeat, this new policy applies to all of you. Some landlords assume that when the see “HUD” that it only applies to federally subsidized housing and public housing. Sometimes that is true, but not in this case. HUD is the federal agency that investigates allegations of fair housing (discrimination) violations. HUD investigates discrimination allegations against all landlords not just landlords of section 8 properties. So this guide published by HUD applies to all of you market rate/conventional housing landlords as well.

Disparate Impact

In order to understand HUD’s view on the use of a person’s criminal history in the screening process you have to understand something referred to as “disparate impact”. In essence, “disparate impact” means that a landlord can have a facially neutral screening policy that is applied equally to everyone but it can still be discriminatory if its use results in a disproportionate impact on a member of a protected class.

HUD’s guide includes lots of statistics that show that across the U.S. African-Americans and Hispanics are arrested, convicted, and incarcerated at rates disproportionate to their share in the general population.

As a result of these statistics, if a landlord considers and applicant’s criminal history (arrest and/or conviction) as part of the screening process, that landlord may be discriminating against African- Americans or Hispanics based on their race and/or national origin (both of which are protected classes under Fair Housing laws).

So even if your screening policy on its face is not discriminatory and even if you are applying it evenly you may still be discriminating based on race and/or national origin, because your policy affects African-Americans and Hispanics more than others.

Substantial, Legitimate, Nondiscriminatory Interest

So does this mean that a landlord cannot take into consideration a rental applicant’s criminal background at all? The answer is both “yes” and “no.” HUD states that a landlord may not be discriminating based on race or national origin if his/her screening criteria with regard to the criminal history of an applicant can be proven to be “necessary to achieve a substantial, legitimate, nondiscriminatory interest of the [housing] provider.”

What the heck does that mean?

There is no easy definition or explanation of this phrase. Whether a landlord’s screening policy with regard to an applicant’s criminal history is “substantial, legitimate, and nondiscriminatory” will depend on many specifics. It could depend on the facts of the crime or how old the conviction is or the exact wording of the criteria or how the criteria is applied etc. etc. And it is helpful to keep in mind that one Fair Housing investigator’s interpretation of the phrase may be different than another’s. And one judge’s view may be different than another’s.

HUD has tried to further clarify this phrase by boiling it all down to the following statements:

  • A landlord must be able to prove through reliable evidence that his/her policy or practice of screening based on criminal history actually assists in protecting resident safety and/or property.
  • Merely relying on generalizations or stereotypes that anyone with a criminal history poses a greater risk than a person without such a background is not sufficient.

Prior Arrests

HUD states that if a landlord rejects a rental applicant because of one or more prior arrests — that have not resulted in a conviction — that the landlord’s policy cannot meet the burden of having a “substantial, legitimate, nondiscriminatory interest.” Translation: if you are doing this, you are discriminating.

HUD states that “the fact of an arrest is not a reliable basis upon which to assess the potential risk to resident safety or property posed by a particular individual. For that reason, a housing provider who denies housing to persons on the basis of arrests not resulting in convictions cannot prove that the exclusion actually assists in protecting resident safety and/or property.”

So landlords may no longer consider whether a rental applicant has been arrested unless that arrest resulted in a conviction.

HUD does not come out and say this but it would seem to me that by logical extension a landlord also can not deny an applicant who has a criminal case that it still pending (since there has not yet been a conviction).

So the applicant that has a pending “first-degree homicide” charge or a “sexual assault of a child” case that is still winding its way through the criminal justice system or is on appeal – cannot be rejected based on that fact alone.

I understand the whole “innocent until proven guilty” viewpoint, but do you think this will comfort your longstanding tenant that has minor children living with her when a middle-aged white guy charged with “sexual assault of a child” is allowed to move in next door to her because his case has not yet gone to trial and therefore he has not yet been convicted?

Oh just wait, it gets even better.

Criminal Convictions

HUD also states that a landlord that imposes a “blanket prohibition” on any rental applicant with a “conviction record — no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then — will be unable to meet this burden.”

Translation: If you deny any and all applicants because they have a criminal conviction you are violating Fair Housing laws and therefore discriminating based on race and national origin, even if you apply that criteria evenly against everyone.

HUD goes on to say that even if you have a more tailored policy or practice that excludes individuals with only certain types of conviction you still must prove that your screening policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” There that pesky phrase again.

HUD recommends that any landlord that wants to consider an applicant’s past criminal convictions as part of the screening process must at a minimum consider the following:

  • The nature and severity of the crime, and
  • The amount of time that has passed since the criminal conduct occurred.

That is the only guidance that HUD has given us. The rest is for you to figure out. And if you don’t handle things properly you may get investigated or sued for discrimination.

Exception: Illegal Manufacture or Distribution of a Controlled Substance

There is one point of clarity. The federal Fair Housing Act does contain a section that states that the taking of an adverse action against a person who has been convicted for illegally manufacturing or distributing a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802) will not be discriminatory. So a landlord is still free to deny a rental applicant if they have ever been convicted of manufacturing or distributing a controlled substance.

Conclusion

What really frustrates me about this whole thing is that landlords are now being told that they must consider a applicant’s criminal convictions on a case by case basis. For years we have been told by HUD that the best way to avoid discriminating against someone is to treat everyone the same; your screening criteria must be “objective” and not “subjective. But now HUD seems to be saying that is no longer appropriate.

Now HUD is telling landlords that they will need to become social workers and therapists and try to determine if an applicant who was convicted of a crime in the past has been rehabilitated or not.

Think of the time and effort that will be required for a landlord to travel to the courthouse to review the criminal case file to determine all of the facts surrounding the crime, all of the events that led up to the person engaging in the criminal conduct, the individual’s past, to review any pre-sentencing report to see what the evaluator thinks about the defendant etc. None of this information is available on CCAP. You will only get this information from the actual file. Or are you just supposed to listen to the applicant’s version of the facts of the conviction and believe them?

It appears to me that HUD might actually be hoping that landlords decide their is too much risk involved in denying any applicant based on their past criminal convictions (except for the conviction for manufacturing or distributing controlled substances – see above) and therefore they should all be accepted.

Landlords will now need to try and determine what convictions might be considered “directly related to the safety of your residents and your property” and hope their interpretation is correct or else risk being investigated and/or sued.

Tristan R. Pettit, Esq.

Source: petriestocking.com

Tristan is a shareholder with the law firm of Petrie+Stocking and focuses his practice in the area of landlord-tenant law representing landlords and property management companies throughout Wisconsin.