Author Archive: kgontarski

How to Fix Inaccurate Information on a Credit Report

How to Fix Inaccurate Information on a Credit Report

How to Fix Inaccurate Information on a Credit Report

Being in the credit reporting business for years, we’re constantly asked how to remove or update information on a credit report that is driving down an individual’s credit score. As a property manager who screens tenant credit reports, you probably get asked that as well. Your applicants have likely said, “My score should be higher than that. That information should have been removed! What do I do?”

Here we’ve outlined the steps a consumer should take in disputing information on their credit report which you can share with your applicants.

 

Most Credit bureaus have a similar 4-step process to facilitate dispute investigations so that resolutions are reached. Here’s how the process works:

Step 1:  The consumer identifies inaccurate information on their most recent credit report.

Step 2:  The consumer selects and completes the most convenient method (online, phone or mail) for them to contact the credit bureau to initiate a dispute investigation.

Step 3:  The credit bureau contacts the data provider that reported the information and asks the data provider to verify the information in question. The source might have up to 45 days to verify whether the information is correct.

Step 4:  The credit bureau documents the outcome of the investigation and makes any necessary changes to the consumer’s credit report.  The credit bureau will notify the consumer of the outcome of their dispute approximately three to five business days after the investigation is complete. If the dispute was initiated online, they will notify the consumer via e-mail and they can view the results of the investigation immediately.

If a consumer submits more than one dispute at the same time, the credit bureau will investigate all of the records in question during the same time period. At the conclusion of the investigation, the consumer will receive a credit report reflecting all of the results.

If the consumer disagrees with the results of an investigation of their credit report, they have the right to add a 100-word consumer statement to their report that explains their side of the situation. The credit bureau’s customer service representatives are available to assist the consumer in writing their statement. Creditors or lenders may review the consumer statement and take it into consideration when making their credit decisions. The statement remains on the credit report until the consumer requests that it be removed.

The credit bureaus’ goal is to report the most accurate information possible. Consumers are encouraged to always use this dispute process to ensure their information is provided correctly to creditors.

Bureau contact information:

Trans Union Consumer Disputes      P. O. Box 2000 Chester, PA 19022     Phone 800-916-8800 https://dispute.transunion.com/dp/dispute/landingPage.jsp

Experian Consumer Disputes         P.O. Box 2002 Allen, TX 75013          Phone  888-397-3742 http://www.experian.com/disputes/

Equifax Consumer Disputes     P.O. Box 740241 Atlanta, GA 30374      Phone  800-685-1111 https://help.equifax.com/app/answers/detail/a_id/32/~/correcting-errors-on-your-credit-file

Rental Property Bookkeeping Suggestions

Rental Property Bookkeeping Suggestions

Rental Property Bookkeeping Suggestions

Whether you are an individual landlord or a property management firm, managing the bookkeeping for your properties is essential. Below are some helpful suggestions:

  • Maintain at least three separate accounts to track funds received and disbursed: 1) security deposits; 2) rent receipts; and 3) company operating funds. The first two accounts are to contain no funds other than those for which they are designated.
  • A security deposit is to remain in the appropriate account for as long as there is no reason to refund it or charge any cost against it.
  • A rental receipt should be deposited the appropriate account before the rental management company takes its commission or fee.
  • Deposit funds promptly, preferably daily, into the proper account(s). Disburse funds promptly when due.
  • Duplicate deposit tickets should be retained in company records to verify deposit dates, amounts, and sources of funds.
  • All check stubs should have an explanation of the purpose of that check. Checkbooks should be balanced regularly with dated deposits noted on the check stubs.
  • Any interest earned should be transferred to the general account, as it is earned. Most states require that the security deposit be kept in a non-interest account.
  • A list of funds being held for others should be maintained and should be consulted and marked with any changes insuring an accurate knowledge of the amount needed in the trust accounts.
  • Lease files should contain a copy of the management agreement between the company and the owner of the property, copies of the statements to the owners as to records of rent received and disbursed, and maintenance bills.
  • Maintain separate cards for each property with the information on security deposits, rent receipts and disbursements to owners, or mortgage payments made on behalf of owners.

Landlord and Property Management Useful Tenant Forms

Landlord and Property Management Useful Tenant Forms

Landlord and Property Management Useful Tenant Forms

Download these useful form for Landlords and Property Managers:

Sample Tenant ApplicationPDF

This is a sample “basic” rental agreement to use as a starting point. Landlord-tenant state laws vary, are continually changing and some states require certain specific mandatory language to be included. You are therefore advised to check your State Laws for current statutes that may affect the rental agreement you use. Most landlords start with a basic agreement and add/modify clauses as they deem necessary.

Authority to Release Tenant Information Form PDF Word

This form allows you to document the applicant’s written authorization for running a credit report and any other searches.

Tenant Move In Move Out Form  PDF Word

This form is designed to assist in recording the condition of a rental unit upon moving in and moving out. To be most useful, it should be filled out in the presence of the property owner and the tenant, and each should retain a signed and dated copy. For each line, either check “OK” or describe any persistent problems present.

Tenant Notice to Vacate  PDF Word

This form is used by the tenant give proper written notice to the landlord when the tenant is vacating and states that the tenant will cooperate with showing the property for re-rental or sale. It includes a place for the tenant to give his forwarding address in order to receive any security refund. It is an excellent way to help reinforce proper move-out procedure. We always staple a copy of this notice to the back of the tenant’s lease to be used when the time comes for the tenant to give notice to vacate.

Notice to Pay Rent or Quit   PDF Word

The Notice to Pay Rent or Quit is a form notice used to demand the rent payment that is overdue and payable. You are legally informing the tenant with this form that you’re about to begin eviction proceedings against him if the default is not cured within a set amount of days.

Conditional Acceptance Letter – (PDF) (Word)

A Conditional Acceptance Letter is a letter that allows you to specify additional requirements the applicant must meet such as additional deposit monies. The Fair Credit Reporting Act requires that a form of this conditional acceptance letter must be provided to any rental applicant you choose to accept with conditions if that decision is based solely or partly on information in a consumer report. Use our free conditional acceptance letter now.

Denial Letter With Reasons/Adverse Action Letter With Reasons – (PDF) (Word)

A Denial Letter with Reasons is also known as an Adverse Action Letter with Reasons. It’s very similar to the Denial Letter but it provides specific reasons for denial based on information in the applicant’s a consumer report. A form of this denial letter must be provided to any rental applicant you choose to deny residency to if that decision is based solely or partly on information in a consumer report. While oral adverse action notices are allowed, written notices provide proof of FCRA compliance. Use our free denial letter with reasons now.

Denial Letter/Adverse Action Letter – (PDF) (Word)

A Denial Letter is also known as an Adverse Action Letter.  The Fair Credit Reporting Act requires that a form of this denial letter or adverse action letter must be provided to any rental applicant you choose to deny residency to if that decision is based solely or partly on information in a consumer report. While oral adverse action notices are allowed, written notices provide proof of FCRA compliance. Use our free denial letter now.

Denial of Security Deposit Letter – (PDF) (Word)

Download a free form to give to your tenant notice that their security deposit will not be refunded.

Partial Refund of Security Deposit Letter – (PDF) (Word)

Download a free form to give to your tenant notice that only part of their security deposit will be refunded.

Itemized Security Deposit Deduction – (PDF) (Word)

Download a free form to give to your tenant which has an itemized list of security deposit deductions.

Security Deposit Rules for Landlords and Property Managers

Security Deposit Rules for Landlords and Property Managers

Security Deposit Rules for Landlords and Property Managers

One thing that all landlords and property managers can agree on is that property damage is frustrating and inevitable. That is why security deposits are collected, to protect the property owner or manager in the case where the tenant fails to perform as outlined in the signed lease. But what are the rules for how a security deposit can be used and how long does a landlord or property manage have to return a security deposit by law?

Move in procedures for landlords and property mangers

First off, be sure upon  move in that you have done a thorough walk through with your tenant using a Move In – Move Out Form and note the condition of the property in writing with your tenant and have them sign the document. This can help eliminate disputes after the tenant vacates regarding existing damage versus damage done by the tenant.

How much can I charge for a security deposit?

State laws vary but typically a landlord or property manager cannot charge more than two times the monthly rent for a security deposit.

Can I deposit the security deposit into my checking account?

By law the security deposit collected by the landlord or property manager must be deposited into a specific account and not deposited into an account with the landlord’s personal or businesses monies. If a landlord or property manager has multiple units, multiple security deposits are permitted to be placed in the same account. Some states require the account must be an interest bearing account and that interest must be given to the tenant at the time the deposit is refunded.

 How long do I have to return the security deposit?

The Landlord or property manager must return the security deposit or give the tenants written notice of damages being claimed within the allotted time granted by each state (see below). The only exception is if the tenant fails to have provided in writing a forwarding address for the return of their security deposit.

What can the security Deposit be used for?

The Security deposit can be used to pay for unpaid rent or damages incurred by the tenant. The landlord can keep a security deposit for broken items at the property incurred by tenant, holes in walls, cleanup of items to be thrown away or leaving a property dirty as determined by the lease or move out agreement. It cannot be used to pay for normal wear and tear such a faded or chipped paint, worn carpet or worn finish on hard floors.

Security Deposit Rules by State

Alabama
Ala. Code § 35-9A-201
Exemption: Security deposit rules do not apply to a resident purchaser under a contract of sale (but do apply to a resident who has an option to buy), nor to the continuation of occupancy by the seller or a member of the seller’s family for a period of not more than 36 months after the sale of a dwelling unit or the property of which it is a part.
Limit: One month’s rent, except for pet deposits, deposits to cover undoing tenant’s alterations, deposits to cover tenant activities that pose increased liability risks.
Deadline for Landlord to Itemize and Return
Deposit: 35 days after termination of tenancy and delivery of possession.
Alaska
Alaska Stat. § 34.03.070
Limit: Two months’ rent, unless rent exceeds $2,000 per month.
Disclosure or Requirement: Orally or in writing, landlord must disclose the conditions under which landlord may withhold all or part of the deposit.
Separate Account: Required.
Advance notice of deduction: Not required.
Deadline for Landlord to Itemize and Return Deposit: 14 days if the tenant gives proper notice to terminate tenancy; 30 days if the tenant does not give proper notice.
Arizona
Ariz. Rev. Stat. Ann. § 33-1321
Exemption: Excludes, among others, occupancy under a contract of sale of a dwelling unit or the property of which it is a part, if the occupant is the purchaser or a person who succeeds to his interest;occupancy by an employee of a landlord as a manager or custodian whose right to occupancy is conditionalupon employment in and about the premises.
Limit: One and one-half months’ rent.
Disclosure or Requirement: If landlord collects a nonrefundable fee, its purpose must be stated in writing. All fees not designated as nonrefundable are refundable.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 14 days; tenant has the right to be present at final inspection.
Arkansas
Ark. Code Ann. §§ 18-16-303 to 18-16-305
Exemption: Excludes, among others, occupancy under a contract of sale of a dwelling unit or the property of which it is a part, if the occupant is the purchaser or a person who succeeds to his or her interest; occupancy by an employee of a landlord whose right to occupancy is conditional upon employment in and about the premises; and landlord
who owns five or fewer rental units, unless these units are managed by a third party for a fee.
Limit: Two months’ rent.
Advance notice of deduction: Not required.
Deadline for Landlord to Itemize and Return Deposit: 30 days.
California
Cal. Civ. Code §§ 1950.5, 1940.5(g)
Exemption: Excludes, among others, occupancy under a contract of sale of a dwelling unit or the property of which the unit is a part, if the occupant is the purchaser or a person who succeeds to his interest; and occupancy by a personal care assistant or other person who is employed by a person with a disability to assist and support such disabled person with daily living activities or housekeeping chores and is provided dwelling space in the personal residence of such disabled person as a benefit or condition of employment.
Limit: Two months’ rent (unfurnished); 3 months’ rent (furnished). Add extra one-half month’s rent for waterbed.
Advance notice of deduction: Required.
Deadline for Landlord to Itemize and Return Deposit: 21 days.
Colorado
Colo. Rev. Stat. §§ 38-12-102 to 38-12-104
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord to Itemize and Return
Deposit: One month, unless lease agreement specifies longer period of time (which may be no more than 60 days); 72 hours (not counting weekends or holidays) if a hazardous condition involving gas equipment requires tenant to vacate.
Connecticut
Conn. Gen. Stat. Ann. § 47a-21
Limit: Two months’ rent (tenant under 62 years of age);
one month’s rent (tenant 62 years of age or older).
Separate Account: Required.
Interest Payment: Interest payments must be made annually and at termination of tenancy. The interest
rate must be equal to the average rate paid on savings deposits by insured commercial banks, as published
by the Federal Reserve Board Bulletin, but not less than 1.5%.
Advance notice of deduction: Not required.
Deadline for Landlord to Itemize and Return Deposit: 30 days, or within 15 days of receiving
tenant’s forwarding address, whichever is later.
Delaware
Del. Code Ann. tit. 25, § 5514
Limit: One month’s rent on leases for one year or
more; no limit for month-to-month rental agreements
(may require additional pet deposit of up to one
month’s rent). No limit for rental of furnished units.
Separate Account: Required. Orally or in writing, the
landlord must disclose to the tenant the location of
the security deposit account.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 20 days.
District of Columbia
D.C. Code Ann. § 42-3502.17; D.C. Mun. Regs. tit. 14,
§§ 308 to 310
Exemption: Tenants in rent stabilized units as of July
17, 1985 cannot be asked to pay a deposit.
Limit: One month’s rent.
Disclosure or Requirement: In the lease, rental
agreement,
or receipt, landlord must state the terms
and conditions under which the security deposit was
collected (to secure tenant’s obligations under the
lease or rental agreement).
Separate Account: Required.
Interest Payment: Required. Interest payments at the
prevailing statement savings rate must be made at
termination of tenancy.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 45 days.
Florida
Fla. Stat. Ann. §§ 83.49, 83.43 (12)
Limit: No statutory limit.
Disclosure or Requirement: Within 30 days of receiving the security deposit, the landlord must disclose in writing whether it will be held in an interest- or non-interest-bearing account; the name of the account depository; and the rate and time of
interest payments. Landlord who collects a deposit must include a copy of Florida Statutes § 83.49(3) in the lease.
Separate Account: Required. Landlord may post a security bond securing all tenants’ deposits instead.
Interest Payment: Interest payments, if any (account need not be interest bearing) must be made annually
and at termination of tenancy. However, no interest is due a tenant who wrongfully terminates the tenancy
before the end of the rental term.
Advance notice of deduction: Required.
Deadline for Landlord to Itemize and Return
Deposit: 15 to 60 days depending on whether tenant disputes deductions.
Georgia
Ga. Code Ann. §§ 44-7-30 to 44-7-37
Exemption: Landlord who owns ten or fewer rental
units, unless these units are managed by an outside
party, need not supply written list of preexisting
damage, nor place deposit in an escrow account.
Rules for returning the deposit still apply.
Limit: No statutory limit.
Disclosure or Requirement: Landlord must give
tenant a written list of preexisting damage to the
rental before collecting a security deposit.
Separate Account: Required. Landlord must place
the deposit in an escrow account in a state or federally
regulated depository, and must inform the tenant
of the location of this account. Landlord
may post a
security bond securing all tenants’ deposits instead.
Advance notice of deduction: Required.
Deadline for Landlord
to Itemize and Return
Deposit: One month.
Hawaii
Haw. Rev. Stat. § 521-44
Limit: One month’s rent.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 14 days.
Idaho
Idaho Code § 6-321
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 21 days or up to 30 days if landlord and
tenant agree.
Illinois
765 Ill. Comp. Stat. 710/1 & 715/3
Limit: No statutory limit.
Interest Payment: Landlords who rent 25 or more
units in either a single building or a complex located
on contiguous properties must pay interest on
deposits held for more than six months.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: Landlords who rent 25 or more units in
either a single building or a complex located on
contiguous properties must pay interest on deposits
held for more than six months. The interest rate is
the rate paid for minimum deposit savings accounts
by the largest commercial bank in the state, as of
December 21 of the calendar year immediately
preceding the start of tenancy.
Indiana
Ind. Code Ann. §§ 32-31-3-9 to 32-31-3-19
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 45 days.
Iowa
Iowa Code Ann. § 562A.12
Limit: Two months’ rent.
Separate Account: Required.
Interest Payment: Interest payment, if any (account
need not be interest-bearing), must be made at
termination of tenancy. Interest earned during first
five years of tenancy belongs to landlord.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Kansas
Kan. Stat. Ann. §§ 58-2550, 58-2548
Limit: One month’s rent (unfurnished); one and
one-half months’ rent (furnished); for pets, add extra
one-half month’s rent.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Kentucky
Ky. Rev. Stat. Ann. § 383.580
Limit: No statutory limit.
Disclosure or Requirement: Orally or in writing,
landlord must disclose where the security deposit is
being held and the account number.
Separate Account: Required.
Advance notice of deduction: Required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 to 60 days depending on whether tenant
disputes deductions.
Louisiana
La. Rev. Stat. Ann. § 9:3251
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: One month.
Maine
Me. Rev. Stat. Ann. tit. 14, §§ 6031 to 6038
Limit: Two months’ rent.
Disclosure or Requirement: Upon request by the
tenant, landlord must disclose orally or in writing
the account number and the name of the institution
where the security deposit is being held.
Separate Account: Required.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days (if written rental agreement) or 21
days (if tenancy at will).
Maryland
Md. Code Ann. [Real Prop.] § 8-203, § 8-203.1
Limit: Two months’ rent.
Disclosure or Requirement: Landlord must provide a
receipt that describes tenant’s rights to move-in and
move-out inspections (and to be present at each),
and right to receive itemization of deposit deductions
and balance, if any; and penalties for landlord’s failure
to comply. Landlord may include this information in
the lease.
Separate Account: Required. Landlord may hold all
tenants’ deposits in secured certificates of deposit, or
in securities issued by the federal government or the
State of Maryland.
Interest Payment: Within 45 days of termination of
tenancy, interest must be paid (at annual rate of 3%,
not compounded) only on security deposits of $50 or
more. Deposit must be held in a Maryland banking
institution.
Advance notice of deduction: Required.
Deadline for Landlord
to Itemize and Return
Deposit: 45 days.
Massachusetts
Mass. Gen. Laws Ann. ch. 186, § 15B
Limit: One month’s rent.
Disclosure or Requirement: At the time of receiving
a security deposit, landlord must furnish a receipt
indicating the amount of the deposit; the name of
the person receiving it and, if received by a property
manager, the name of the lessor for whom the
security deposit is received; the date on which it is
received; and a description of the premises leased
or rented. The receipt must be signed by the person
receiving the security deposit.
Separate Account: Required. Within 30 days of
receiving security deposit, landlord must disclose the
name and location of the bank in which the security
deposit has been deposited, and the amount and
account number of the deposit.
Interest Payment: Landlord must pay tenant 5%
interest per year or the amount received from the
bank (which must be in Massachusetts) that holds
the deposit. Interest should be paid yearly, and
within 30 days of termination date. Interest will not
accrue for the last month for which rent was paid in
advance.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Michigan
Mich. Comp. Laws §§ 554.602 to 554.616
Limit: One and one-half months’ rent.
Disclosure or Requirement: Within 14 days of
tenant’s taking possession of the rental, landlord
must furnish in writing the landlord’s name and
address for receipt of communications, the name and
address of the financial institution or surety where
the deposit will be held, and the tenant’s obligation
to provide in writing a forwarding mailing address
to the landlord within 4 days after termination of
occupancy. The notice shall include the following
statement in 12-point boldface type that is at least
4 points larger than the body of the notice or lease
agreement: “You must notify your landlord in writing
within 4 days after you move of a forwarding address
where you can be reached and where you will receive
mail; otherwise your landlord shall be relieved of
sending you an itemized list of damages and the
penalties adherent to that failure.”
Separate Account: Required. Landlord must place
deposits in a regulated financial institution, and may
use the deposits as long as the landlord deposits with
the secretary of state a cash or surety bond.
Advance notice of deduction: Required. Tenants
must dispute the landlord’s stated deductions within
7 days of receiving the itemized list and balance, if
any, or give up any right to dispute them.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Minnesota
Minn. Stat. Ann. §§ 504B.175, 504B.178
Limit: No statutory limit.
Disclosure or Requirement: Before collecting rent
or a security deposit, landlord must provide a copy
of all outstanding inspection orders for which a
citation has been issued, pertaining to a rental unit
or common area, specifying code violations that
threaten the health or safety of the tenant, and all
outstanding condemnation orders and declarations
that the premises are unfit for human habitation.
Citations for violations that do not involve threats
to tenant health or safety must be summarized and
posted in an obvious place. With some exceptions,
landlord who has received notice of a contract
for deed cancellation or notice of a mortgage
foreclosure sale must so disclose before entering a
lease, accepting rent, or accepting a security deposit;
and must furnish the date on which the contract
cancellation period or the mortgagor’s redemption
period ends.
Interest Payment: Landlord must pay 1% simple,
noncompounded
interest per year. (Deposits
collected before 8/1/03 earn interest at 3%, up to
8/1/03, then begin earning at 1%.) Any interest
amount less than $1 is excluded.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: Three weeks after tenant leaves and landlord
receives forwarding address; five days if tenant must
leave due to building condemnation.
Mississippi
Miss. Code Ann. § 89-8-21
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 45 days.
Missouri
Mo. Ann. Stat. § 535.300
Limit: Two months’ rent.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Montana
Mont. Code Ann. §§ 70-25-101 to 70-25-206
Limit: No statutory limit.
Advance notice of deduction: Required. Tenant is
entitled to advance notice of cleaning charges, but
only if such cleaning is required as a result of tenant’s
negligence and is not part of the landlord’s cyclical
cleaning program.
Advance notice of deduction: Required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days; 10 days if no deductions.
Nebraska
Neb. Rev. Stat. § 76-1416
Limit: One month’s rent (no pets); one and onequarter
months’ rent (pets).
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 14 days.
Nevada
Nev. Rev. Stat. Ann. §§ 118A.240 to 118A.250
Limit: Three months’ rent; if both landlord and
tenant agree, tenant may use a surety bond for all or
part of the deposit.
Disclosure or Requirement: Lease or rental
agreement must explain the conditions under which
the landlord will refund the deposit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
New Hampshire
N.H. Rev. Stat. Ann. §§ 540-A:5 to 540-A:8; 540-B:10
Exemption: Entire security deposit law does not
apply to landlord who leases a single-family residence
and owns no other rental property, or landlord who
leases rental units in an owner-occupied building of
five units or fewer (exemption does not apply to any
individual unit in owner-occupied building that is
occupied by a person 60 years of age or older).
Limit: One month’s rent or $100, whichever is
greater; when landlord and tenant share facilities, no
statutory limit.
Disclosure or Requirement: Unless tenant has
paid the deposit by personal or bank check, or by a
check issued by a government agency, landlord must
provide a receipt stating the amount of the deposit
and the institution where it will be held. Regardless of
whether a receipt is required, landlord must inform
tenant that if tenant finds any conditions in the
rental in need of repair, tenant may note them on the
receipt or other written instrument, and return either
within five days.
Separate Account: Required. Upon request, landlord
must disclose the account number, the amount on
deposit, and the interest rate. Landlord may post a
bond covering all deposits instead of putting deposits
in a separate account.
Interest Payment: Landlord who holds a security
deposit for a year or longer must pay interest at a rate
equal to the rate paid on regular savings accounts in
the New Hampshire bank, savings & loan, or credit
union where it’s deposited. If a landlord mingles
security deposits in a single account, the landlord
must pay the actual interest earned proportionately
to each tenant. A tenant may request the interest
accrued every three years, 30 days before that year’s
tenancy expires. The landlord must comply with the
request within 15 days of the expiration of that year’s
tenancy.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days; for shared facilities, if the deposit
is more than 30 days’ rent, landlord must provide
written agreement acknowledging receipt and
specifying when deposit will be returned—if no
written agreement, 20 days after tenant vacates.
New Jersey
N.J. Stat. Ann. §§ 46:8-19, 44:8-21, 44:8-26
Exemption: Security deposit law does not apply to
owner-occupied buildings with three or fewer units
unless tenant gives 30 days’ written notice to the
landlord of the tenant’s wish to invoke the law.
Limit: One and one-half months’ rent. Any additional
security deposit, collected annually, may be no
greater than 10% of the current security deposit.
Separate Account: Required. Within 30 days of
receiving the deposit and every time the landlord
pays the tenant interest, landlord must disclose the
name and address of the banking organization where
the deposit is being held, the type of account, current
rate of interest, and the amount of the deposit.
Interest Payment: Landlord with 10 or more units
must invest deposits as specified by statute or place
deposit in an insured money market fund account,
or in another account that pays quarterly interest
at a rate comparable to the money market fund.
Landlords with fewer than 10 units may place deposit
in an interest-bearing account in any New Jersey
financial institution insured by the FDIC. All landlords
may pay tenants interest earned on account annually
or credit toward payment of rent due.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days; five days in case of fire, flood,
condemnation, or evacuation.
New Mexico
N.M. Stat. Ann. § 47-8-18
Limit: One month’s rent (for rental agreement of less
than one year); no limit for leases of one year or more.
Interest Payment: Landlord who collects a deposit
larger than than one month’s rent on a year’s lease
must pay interest, on an annual basis, equal to the
passbook interest.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
New York
N.Y. Gen. Oblig. Law §§ 7-103 to 7-108
Limit: No statutory limit for nonregulated units.
Disclosure or Requirement: If deposit is placed in a
bank, landlord
must disclose the name and address of
the banking organization where the deposit is being
held, and the amount of such deposit.
Separate Account: Statute requires that deposits not
be commingled with landlord’s personal assets, but
does not explicitly require placement in a banking
institution (however, deposits collected in buildings
of six or more units must be placed in New York bank
accounts).
Interest Payment: Landlord who rents out nonregulated
units in buildings with five or fewer units
need not pay interest. Interest must be paid at the
prevailing rate on deposits received from tenants who
rent units in buildings containing six or more units.
The landlord in every rental situation may retain
an administrative fee of 1% per year on the sum
deposited. Interest can be subtracted from the rent,
paid at the end of the year, or paid at the end of the
tenancy according to the tenant’s choice.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: “Within a reasonable time.”
North Carolina
N.C. Gen. Stat. §§ 42-50 to 42-56
Exemption: Not applicable to single rooms rented on
a weekly, monthly, or annual basis.
Limit: One and one-half months’ rent for month-tomonth
rental agreements; two months’ rent if term
is longer than two months; May add an additional
“reasonable” nonrefundable pet deposit.
Disclosure or Requirement: Within 30 days of the
beginning of the lease term, landlord must disclose
the name and address of the banking institution
where the deposit is located.
Separate Account: Required. The landlord may, at his
option, furnish a bond from an insurance company
licensed to do business in the state.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days; if landlord’s claim against the deposit
cannot be finalized within that time, landlord may
send an interim accounting and a final accounting
within 60 days of the tenancy’s termination.
North Dakota
N.D. Cent. Code § 47-16-07.1
Limit: One month’s rent (if tenant has a pet, not to
exceed the greater of $2,500 or amount equal to two
months’ rent).
Separate Account: Required.
Interest Payment: Landlord must pay interest if the
period of occupancy is at least nine months. Money
must be held in a federally insured interest-bearing
savings or checking account for benefit of the tenant.
Interest must be paid upon termination of the lease.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Ohio
Ohio Rev. Code Ann. § 5321.16
Limit: No statutory limit.
Interest Payment: Any deposit in excess of $50 or
one month’s rent, whichever is greater, must bear
interest on the excess at the rate of 5% per annum if
the tenant stays for six months or more. Interest must
be paid annually and upon termination of tenancy.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Oklahoma
Okla. Stat. Ann. tit. 41, § 115
Limit: No statutory limit.
Separate Account: Required.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Oregon
Or. Rev. Stat. § 90.300
Limit: No statutory limit. Landlord may not impose
or increase deposit within first year unless parties
agree to modify the rental agreement to allow for a
pet or other cause, and the imposition or increase
relates to that modification.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 31 days.
Pennsylvania
68 Pa. Cons. Stat. Ann. §§ 250.511a to 250.512
Limit: Two months’ rent for first year of renting; one
month’s rent during second and subsequent years of
renting.
Separate Account: Required.
Instead of placing deposits in a separate account,
landlord may purchase a bond issued by a bonding
company authorized to do business in the state.
Interest Payment: Tenant who occupies rental unit
for two or more years is entitled to interest beginning
with the 25th month of occupancy. Landlord must
pay tenant interest (minus 1% fee) at the end of the
third and subsequent years of the tenancy.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Rhode Island
R.I. Gen. Laws § 34-18-19
Limit: One month’s rent.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 20 days.
South Carolina
S.C. Code Ann. § 27-40-410
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
South Dakota
S.D. Codified Laws Ann. § 43.32-6.1, § 43-32-24
Limit: One month’s rent (higher deposit may be
charged if special conditions pose a danger to
maintenance of the premises).
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: Two weeks to return entire deposit or a
portion, and supply reasons for withholding; 45 days
for a written, itemized accounting, if tenant requests it.
Tennessee
Tenn. Code Ann. § 66-28-301
Exemption: Does not apply in counties having a
population of less than 68,000, according to the 1970
federal census or any subsequent federal census.
Limit: No statutory limit.
Separate Account: Required. Orally or in writing,
landlord must disclose the location of the separate
account used by landlord for the deposit.
Advance notice of deduction: Required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days
Texas
Tex. Prop. Code Ann. §§ 92.101 to 92.109
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days.
Utah
Utah Code Ann. §§ 57-17-1 to 57-17-5
Limit: No statutory limit.
Disclosure or Requirement: For written leases
or rental agreements
only, if part of the deposit is
nonrefundable, landlord must disclose this feature.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days, or within 15 days of receiving
tenant’s forwarding
address, whichever is later, but if
there is damage to the premises, 30 days.
Vermont
Vt. Stat. Ann. tit. 9, § 4461
Limit: No statutory limit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 14 days; 60 days if the rental is seasonal and
not intended as the tenant’s primary residence.
Virginia
Va. Code Ann. § 55-248.15:1
Exemption: Single-family residences are exempt
where the owner(s) are natural persons or their
estates who own in their own name no more than ten
single-family residences subject to a rental agreement.
Exemption applies to the entire Virginia Residential
Landlord and Tenant Act.
Limit: Two months’ rent.
Interest Payment: Landlord must accrue interest
on all money held as security at annual rate equal to
4% below the Federal Reserve Board discount rate
as of January 1 of each year. The deposit must begin
earning interest as of the date the rental agreement
is signed, but no interest is payable unless landlord
holds the deposit for over 13 months after the date
the rental agreement was signed and there has been
continuous occupancy of the same unit. Interest
must be paid upon termination of the tenancy.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 45 days; tenant has right to be present at
final inspection.
Washington
Wash. Rev. Code Ann. §§ 59.18.260 to 59.18.285
Exemption: Security deposit rules do not apply to a
lease of a single-family dwelling for a year or more, or
to any lease of a single-family dwelling containing a
bona fide option to purchase by the tenant, provided
that an attorney for the tenant has approved on the
face of the agreement any lease so exempted. Rules
also do not apply to occupancy by an employee of a
landlord whose right to occupy is conditioned upon
employment in or about the premises; or the lease
of single-family rental in connection with a lease of
land to be used primarily for agricultural purposes;
or rental agreements for seasonal agricultural
employees.
Limit: No statutory limit.
Disclosure or Requirement: In the lease, landlord
must disclose the circumstances under which all
or part of the deposit may be withheld, and must
provide a receipt with the name and location of
the banking institution where the deposit is being
held. No deposit may be collected unless the rental
agreement is in writing and a written checklist or
statement specifically describing the condition and
cleanliness of or existing damages to the premises and
furnishings is provided to the tenant at the start of
the tenancy.
Separate Account: Required.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 14 days.
West Virginia
W.Va. Code § 37-6A-1 et seq.
Deadline for Landlord
to Itemize and Return
Deposit: 60 days from the date the tenancy has
terminated, or within 45 days of the occupancy of
a subsequent tenant, whichever is shorter. If the
damage exceeds the amount of the security deposit
and the landlord has to hire a contractor to fix it, the
notice period is extended 15 days.
Wisconsin
Wis. Admin. Code ATCP 134.06, Wis. Stat. § 704.28
Exemption: Security deposit rules do not apply to a
dwelling unit occupied, under a contract of sale, by
the purchaser of the dwelling unit or the purchaser’s
successor in interest; or to a dwelling unit that the
landlord provides free to any person, or that the
landlord provides as consideration to a person
whom the landlord currently employs to operate or
maintain the premises.
Limit: Before accepting the deposit, landlord
must inform tenant of tenant’s inspection rights,
disclose all habitability defects and show tenant any
outstanding building and housing code violations,
inform tenant of the means by which shared utilities
will be billed, and inform tenant if utilities are not
paid for by landlord.
Disclosure or Requirement: Before accepting the
deposit, landlord must inform tenant of tenant’s
inspection rights.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: For unpaid rent, 30 days, or within 15 days
of receiving tenant’s forwarding address, whichever
is later; additional 30 days for deductions due to
damage.
Wyoming
Wyo. Stat. §§ 1-21-1207, 1-21-1208
Limit: No statutory limit.
Disclosure or Requirement: Lease or rental
agreement must state whether any portion of a
deposit is nonrefundable,
and landlord must give
tenant written notice of this fact when collecting the
deposit.
Advance notice of deduction: Not required.
Deadline for Landlord
to Itemize and Return
Deposit: 30 days, or within 15 days of receiving
tenant’s forwarding
address, whichever is later; 60
days if there is damage.

 

How do you evict a tenant?

How do you evict a tenant

How do you evict a tenant

Below is a walk-through of the eviction process, including the termination notices required for different situations.

It’s an unpleasant situation, and a costly one. It’s one that can possibly be avoided with proper tenant screening, but we’ll get back to that. We’ll walk through the eviction process so you have a road map to navigate this frustrating process.

The first thing you need to be aware of is a landlord can’t begin an eviction lawsuit without first legally terminating the tenant’s status as a current tenant. This means you have to give the tenant written notice, as specified in the state’s termination statute http://www.starpointtenantscreening.com/landlord-and-tenant-laws-by-state.html.  If the tenant doesn’t move or address and correct the outstanding issues (pay rent, remove pet, etc) you can then file a lawsuit to evict. This is referred to as an unlawful detainer, or UD, lawsuit.)

Please check your state laws to end a tenancy. Each state has its own procedures as to how termination notices and eviction papers must be written and delivered (“served”).

Termination With Cause

Terminology varies from state to state, but there are basically three types of termination notices for tenancies that landlords terminate due to tenant misbehavior:

  • Pay Rent or Quit Notices. This is typically used when the tenant has not paid the rent. They give the tenant a few days (three to five in most states) to pay the rent or move out (“quit”).
  • Cure or Quit Notices. This is typically given after a tenant violates a term or condition of the lease or rental agreement, such as a no-pets clause or the requirement to refrain from making excessive noise. Usually, the tenant has a set amount of time in which to correct, or “cure,” the violation. A tenant who fails to do so must move or face the possibility of an eviction lawsuit.
  • Unconditional Quit Notices. This one is the most severe. They order the tenant to vacate the premises with no chance to pay the rent or correct a lease or rental agreement violation. In most states, unconditional quit notices are allowed only when the tenant has:
    • repeatedly violated a significant lease or rental agreement clause
    • been late with the rent on more than one occasion
    • seriously damaged the premises, or
    • engaged in serious illegal activity, such as drug dealing on the premises.

Unfortunately, after receiving notice, some tenants won’t leave or fix the lease or rental agreement violation. If you still want the tenant to leave, you must begin an unlawful detainer lawsuit by properly serving the tenant with a summons and complaint for eviction.

Notice for Termination Without Cause

The most common notice landlords use is a 30-Day or 60-Day Notice to Vacate to end a month-to-month tenancy when the tenant has not done anything wrong. Many rent control cities, however, do not allow this.

Tenant Defenses

In the case where the tenant chooses to defend themselves, get ready for delays. It may add weeks and  even months  to the process. A tenant will often point to errors the landlord or property manager made in handling the very specific eviction process, or their poor custodianship of the property, its upkeep and the timeliness of response to tenant complaints regarding repairs/issues.

Removal of the Tenant

If you do win the unlawful detainer lawsuit, you will get a judgment for possession of the property and/or for unpaid rent. But you can’t just move the tenant and his things out onto the sidewalk — trying to remove a tenant yourself can cause a lot of trouble. (For more information, see Nolo’s article Don’t Lock Out or Freeze Out a Tenant — It’s Illegal.)

All that said, evicting a tenant is obviously a BIG headache. Avoid it if you can.

No tenant screening process is fool proof but using these inexpensive reports and tools can sure give you a huge advantage in avoiding potential disasters.

Look at the average cost of evicting a tenant:

Court Costs: $80 +Attorney Fees: $150 + Rent Past Due: $1,500 + Damages: $1,000 + Cleaning/Rent $350+

= Average Cost: $3,083

By running an Eviction Search and possibly a Tenant Credit Report, for a total cost of under $20-$25 from most vendors, a lot of money, and aggravation could be saved. An Eviction Report searches for all eviction records by state or all states that match the tenant’s name and date of birth. The tenant credit report will show you any public records filed on the tenant such as judgments and liens. It’s important to run both reports as an eviction may not always be reported as a judgment or lien if the tenant was not found at fault. The Eviction report however will show that an eviction was filed. Some companies will even give you a free previous address report with your Eviction report to further corroborate the tenant’s activities http://www.starpointtenantscreening.com/eviction-reports.html.

Remember: an ounce of prevention is worth a pound of cure.

Happy renting!

To learn more about evicting a tenant or ending a lease, visit NOLO. I’m a big a big fan of their unbiased free legal info.

What does the tenant’s credit score really mean?

What does the Credit Score really mean

What does the Credit Score really mean

Being in the credit reporting industry for over 15 years, I’ve heard that question hundreds of times. “What does a credit score really mean?”

It’s funny because these scores determine whether we approve or are approved for some of the biggest choices in life yet most of us have no idea what the number means or how it’s calculated. Whether the scores are used to evaluate a tenant application, mortgage application or the approval for the purchase of a new car, these scores are powerful. Understanding them is critical to helping you choose the right tenants and for keeping your own credit score as high as possible.

As you already know, there are 3 credit reporting bureaus: Trans Union, Experian and Equifax. For better or worse, that’s it. All of the information that is compiled on a person’s debt, payment and collections history lives at one, two or all three of these bureaus. The data is reported to them from thousands of various creditors, collectors and public record data bases. Not just anyone can report data to the bureaus. Companies and organizations have to be validated as reliable data sources and go through an extensive accreditation process to report data to the bureaus.

That said, that doesn’t mean that all the data reported by the companies reporting to the bureaus is perfectly accurate. Most of it is, but there is an element of human error and technical mess ups in any data reporting. It’s important for everyone to take advantage of the “free credit report” each consumer is allotted annually to ensure the data on your report is accurate.

But even with its occasional errors, the credit report is still the single best tool for evaluating a person’s likelihood to pay as promised. For a property manager or a landlord, I would suggest always pulling a tenant credit report to evaluate an applicant. You’re getting a lengthy snapshot of the renter’s payment history which gives you a good idea of whether they will pay you on time, late or at all.

Let’s look at some quick key information about credit scores and how they are calculated:

 

What things affect scores, and how much?

The credit score falls in a range of 300-850 with 850 being perfect.

Picture the factors affecting a credit score as a pie chart. The areas affecting the score calculation the most take up the biggest parts of the pie and are therefore weighed more heavily.

Payment history:

This includes the timeliness of payment as reported by accounts including mortgage, credit cards, utilities, auto, etc.

The bureaus are looking at whether accounts are paid as agreed and the severity of any delinquency. They’ll focus on the time since derogatory reporting occurred. But they also evaluate the positive credit following past payment problems. In other words, it’s never too late to start building a better score. They will also weigh the amounts past due on any accounts and the number of items past due. Obviously adverse public records like bankruptcies, liens and judgments carry a lot of weight here.

Amount of credit owing:

This looks at how much money is owed or outstanding.

The amount of money owing on accounts (determined by type of account) is evaluated heavily here along with the number of accounts with balances owing. Another thing that hurts a credit score is carrying a high balance on a revolving credit account even if you have a high credit limit and are paying as agreed. It shows an accumulation of debt with a high risk since it’s not being eliminated month after month.

Length of credit history:

The score is affected by how much credit history has been established. The longer, the better.

This is a tough one for people trying to establish credit for the first time. If they don’t have a lot of time under their belts paying on accounts, it will bring down their scores initially. However, paying the accounts they have on time will build a great score over time. That said, some people open accounts they don’t intend to use just to establish a credit history, or to get that 20% discount at the store (yes, even I’ve done it). But if you never use that account, it actually hurts you. The bureaus look at the dates since last account activity to evaluate the weight and viability of the account and an unused account is seen as a negative. Do you have five store cards open that you seldom or never use? Close them. Best rule of thumb is if you don’t need it, close it or don’t open it in the first place. That 20% discount is not worth the long term hit to your credit score.

New credit:

New accounts affect the score less since the track record with these accounts is short.

This includes the number of recently opened accounts (which are those store accounts you opened for the discount) the time since account was opened and the number of recent credit inquiries. I’ll say it again, please pass up the store credit cards!

Types of credit in use:

The bureaus like to see a diverse line of credit to illustrate the subject can manage a variety of accounts such as auto, revolving credit cards, bank loans, etc.

Try to maintain a mixture of revolving & installment accounts and pay them as agreed. A good number of accounts is two to five various kinds.

With all the factors considered, it’s important to understand what affects a credit score. It will help you understand what you are looking at when you see your own score or the score of your tenant applicant.

Again, I believe pulling a credit report to screen tenant applicants is a very smart move for landlords and property managers alike, one that can give you insight into the applicant’s payment patterns. It’s better to know upfront than to find out the hard and expensive way. I hope this article was helpful to you. Let us know!

Happy renting!

Renting your property

Renting your Property

Renting your Property

If you’re thinking about renting out your property, it’s important to set a rent that will cover your costs, earn you a profit, minimize vacancies and provide value to your tenants.

The key factor in determining your home’s rental price is its assessed value. Ask at least 1.1 percent of your home’s value up to $100,000, 1.0 percent for the next $25,000, and less than 1.0 percent for the remainder. This factors in such variables as usage and wear, as well as the length of time that your property goes empty in between renters.

The value of the premium you charge for additional amenities or grounds is a judgment call that reflects both the added value you are providing to renters and the extra costs you bear as a resulting of maintaining, repairing and replacing the extra perks. If you rent your home fully furnished, you can ask a considerably higher rent, about double what you would ask for an empty property–and even more if you have high-quality furniture and expensive decorations. In the event your property has the opposite of amenities, such as dysfunctional plumbing or a shabby lawn, the same logic applies in reverse: Ask a lower rent to offset these unappealing features.

You have to adjust your rent to reflect the local rental economy. If rental properties in your neighborhood are going unoccupied, then it makes sense for you to adjust your rent downward so as to be more likely to attract a tenant. If rental housing is in short supply, you can ask for a higher rent. Generally, in a low-demand economy you may have to reduce your rent by one-third to one-half as compared to a high-demand economy.

The desirability of a location is tricky to estimate. One renter might place a premium on a location near bus lines, coffee houses and museums, while another might place a premium on a secluded, quiet property with no commerce nearby. You can spin your advertisement so as to appeal to people who will be more likely to place a premium on the location of your property. Some factors are unspinnable: If your property is next to railroad tracks or a sewage treatment plant, you will need to ask a lower rent in order to remain competitive.

You can expect to collect a premium for shorter rental durations. This reflects two purposes. First, it reflects the fact that your own costs are increased because of having to clean and prepare the property more often. Likewise, it reflects the cost of a greater frequency of vacancy. Second, it reflects the different nature of short-term versus long-term housing. People who are renting for the short term are usually doing so for some special occasion, in addition to their underlying need for living space. That makes the rental worth more, to the tune of 10 to 50 percent depending on the length of the rental, as compared to a long-term rental of six months or more.

How to Comply with the Fair Credit Reporting Act

Fair Credit Reporting Act Compliance

Fair Credit Reporting Act Compliance

If you’re a landlord, you can use consumer credit reports as part of your tenant screening process to evaluate rental applications – as long as you follow the provisions of the Fair Credit Reporting Act (FCRA).

The FCRA is designed to protect the privacy of consumer report information and to guarantee that the information supplied by consumer reporting agencies (CRAs) is as accurate as possible. The FCRA requires landlords who deny a lease based on information in the applicant’s consumer report to provide the applicant with an “adverse action notice.”

What is a Consumer Report?

A consumer report contains information about a person’s credit characteristics, character, general reputation, and lifestyle. A report also may include information about someone’s rental history, such as information from previous landlords or from public records like housing court or eviction files. To be covered by the FCRA, a report must be prepared by a CRA – a business that assembles such reports for other businesses. The most common type of CRA is the credit bureau.

Landlords often use consumer credit reports to help them evaluate rental applications. These reports include:

  • A credit report from a credit bureau, such as Trans Union, Experian, and Equifax or an affiliate company;
  • A report from a tenant-screening service that describes the applicant’s rental history based on reports from previous landlords or housing court records;
  • A report from a tenant-screening service that describes the applicant’s rental history, and also includes a credit report the service got from a credit bureau;
  • A report from a tenant-screening service that is limited to a credit report the service got from a credit bureau; and
  • A report from a reference-checking service that contacts previous landlords or other parties listed on the rental application on behalf of the rental property owner.

Landlords often ask applicants to give personal, employment and previous landlord references on their rental applications. Whether verifying such references is covered by the FCRA depends on who does the verification. A reference verified by the landlord’s employee is not covered by the Act; a reference verified by an agency hired by the landlord to do the verification is covered.

What is an Adverse Action?

An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. Common adverse actions by landlords include:

  • Denying the application;
  • Requiring a co-signer on the lease;
  • Requiring a deposit that would not be required for another applicant;
  • Requiring a larger deposit than might be required for another applicant; and
  • Raising the rent to a higher amount than for another applicant.

The Adverse Action Notice

When an adverse action is taken that is based solely or partly on information in a consumer report, the FCRA requires you to provide a notice of the adverse action to the consumer. The notice must include:

  • The name, address and telephone number of the CRA that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
  • A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and
  • A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.

Disclosure of this information is important because some consumer reports contain errors.

The adverse action notice is required even if information in the consumer credit report was not the main reason for the denial, the increase in security deposit or rent or other adverse action. In fact, even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.

While oral adverse action notices are allowed, written notices provide proof of FCRA compliance.

Non-Compliance with the FCRA

Landlords who fail to provide required disclosure notices face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations of the FCRA. In addition, the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties.

However, a landlord who inadvertently fails to provide a required notice in an isolated case has legal protections, so long as he or she can demonstrate “that at the time of the . . . violation he maintained reasonable procedures to assure compliance” with the FCRA.

Sample Rental Application

Rental ApplicationThere are many things to think about as a landlord or a property manager when you are getting ready to rent out your property. But one of the most important items on your checklist should be making sure you have a good Tenant Application Form.  Having the right tenant application form handy for you applicants to fill out will save you time and money and in some cases, costly and stressful legal headaches.

Your Tenant Application Form should ALWAYS collect the following:

  • First, Middle and Last name of your applicant. The more info you have, the better for tenant screening purposes.
  • Current address of the applicant.
  • Current landlord name and phone number information for reference checking purposes.
  • Current employer and employer phone number for employment verification.
  • Social Security Number of the applicant. This is a must have for doing a tenant credit check.
  • The date of birth of the applicant. This is a must have for the tenant credit check and the tenant criminal background check.
  • Detailed list of other potential occupants
  • Disclosure and details of any pets
  • The applicant’s signed authorization and acknowledgement for a tenant credit check, a criminal background check and other tenant screening. It is the law under the Fair Credit Reporting Act that you have to have the applicant’s signed authorization before you can attain credit history or background information on the applicant.

Your Tenant Application Form should NEVER collect the following:

  • Race
  • Religion
  • Sexual Orientation

Getting the right information the first time and side stepping legal pitfalls will help you expedite the application process and allow you to get a qualified applicant into your property faster. Many sites offer a Tenant Application Form Template to help you get started. Be sure to check with your state laws to see if additional modifications need to be made to any template you find.  Attached is a Tenant Application Form Template you can use. Best of luck and happy renting!

 

Rental Property Taxes 2014

tax timeIt’s that dreaded time of year again when we all have to buckle down and work on our taxes. This process can be a little more complicated for those that own renal property. Here are answers to some general questions that most landlords have when it comes to rental property taxes:

 

Is the income from rental property taxable?

Yes, the income is taxable but the whole amount you collect is not necessarily taxable. You may subtract the cost of getting your rental ready to rent and the amount of money to maintain the rental property.  Report rental income and expenses on Schedule E and file it with you Form 1040.

If I receive rent in January of 2015 for December of 2014, in what year do I report it?

You would report the rental income on your 2014 tax return because you received it in 2014. You always report the rent for the year you received it.

 Are Security Deposits Taxed?

No, security deposits that are intended to be returned to the tenants at the end of the lease are not taxable.  If you incur damages from tenant and have to keep part of the security deposit then you must report that money as income. It would however be offset by the deduction on you Schedule E for the cost of repair for the damages

Note that a deposit for a last month’s rent is taxable when you receive it because that is simply rent paid in advance.

What can I deduct on my rental property income?

All the expenses you pay for in maintaining and managing your rental property are typically deductible. Note that even if the property is vacant but you’re maintaining it, you can add up those expenses to set against your rental income when you get it.

Deductions include:

  • Supplies
  • Yard maintenance
  • Depreciation
  • Advertising
  • Homeowner association dues and condo fees
  • Insurance premiums
  • Interest expense
  • Local property taxes
  • Management fees
  • Pest control
  • Professional fees
  • Rental of equipment
  • Utilities
  • Repairs

Keep good records even though it can be a hassle. You must be able to back up any deductions you take!