Madison Landlord Council

Screening Tenant Applicants

Tenant selection is an extremely important aspect of the entire residential rental housing business. The process of “screening” an application is the only practical way for a landlord to determine if the applicant will be a conscientious, civilized, neighborly, financially responsible tenant. The fact is that "bad tenants," are usually the result of bad or nonexistent tenant screening, and the number one cause of residential landlord failure. When landlords fail to properly screen tenant applicants, they not only lose control of their tenants; they also lose control of their rental property, which often results in foreclosure and bankruptcy.

Here are six steps to follow when selecting tenants:

Establish tenant qualification standards based on legitimate business reasons.
Provide all tenant applicants with a copy of your tenant qualification standards.
Apply your tenant qualification standards uniformly to all tenant applicants.
Require consumer credit and criminal background reports on all tenant applicants.
Check, verify and evaluate the rental history and income of all tenant applicants.
Deny renting to all tenant applicants who do not meet your tenant qualification standards.

The Madison Landlord Council Forms CD©, can help you with every step of the process.

Thoroughly screen ALL tenant applicants. The best way to weed out potentially 'undesirable tenants' is to check, verify and evaluate:

Credit History
Criminal History
Rental History
Income

Establish “Tenant Qualification Standards” Based On Legitimate Business Reasons.
Establish tenant qualification standards based on legitimate business reasons and apply them uniformly when evaluating tenant applicants to ensure that only qualified tenant applicants are selected. At a minimum, you should require that all tenant applicants uniformly meet the following ten tenant qualification standards:

Complete and Sign Rental Application: All tenant applicants must legibly and truthfully complete and sign a Rental Application.
Complete And Sign Personal Information Release Form: All tenant applicants must legibly and truthfully complete and sign a Personal Information Release Form authorizing the landlord or landlord's agent the right to obtain personal information about the applicant's credit, criminal, rental and employment history.
Earnest Money: Applicant should provide earnest money deposit along with rental application as a way to show serious intent. Earnest money must be applied towards security deposit.
Eighteen Years of Age: All tenant applicants must be eighteen years of age. If you enter into a rental agreement with a minor under the legal age of eighteen, the agreement will be unenforceable in court!
Valid Personal Photo Identification: All tenant applicants must have a valid form of personal photo identification such as a Drivers License, State identification card, US Department of Defense identification card or United States Passport or Visa. Do not rent to tenant applicants who don't have a valid form of personal photo identification to prove who they are.
Good Credit History: All tenant applicants must be creditworthy and have no charged-off accounts, accounts placed for collection, late payment accounts, or bankruptcy within the past twenty-four months.
Violent or Repeat Non-Violent Criminal Conviction History: Tenant applicants must not have violent criminal convictions. Check with your local county or municipality for ordinances relating to criminal record exceptions. Criminal offenses must bear a substantial relationship to tenancy; disturbing neighbors, property destruction, drug related offenses etc. Madison and Dane County provide for exceptions with time limits.
Good Rental History: All tenant applicants must have a rental history with no late payments, evictions or judgments for past-due rent. Do not rent to tenant applicants with lousy rental histories!
Verifiable Source of Legitimate and Sufficient Income: All tenant applicants must have a verifiable source of legitimate income. A general rule to determine sufficient income (federal guideline) is the 3 times rule (monthly rent not to exceed three times gross monthly income). However Madison ordinance allows exceptions to this guideline if tenant applicant can prove previous ability to pay.

Obtain Consumer Credit And Criminal Background Reports On All Tenant Applicants
The best way to avoid renting to professional deadbeats and career criminals is to obtain consumer credit and criminal background reports on all tenant applicants. Check, verify and evaluate their credit and criminal histories. See our Madison Landlord Council vendors.

Base Denial to Rent On your Tenant Qualifications Standards.
After you have used consumer credit and criminal background reports and other sources to check, verify and evaluate a tenant applicant's personal information, you must decide to accept or deny the applicant based solely on whether they're a good business risk and not on personal prejudices. The following are four examples of legitimate business reasons to deny a tenant application:

Credit History: People who don't pay their bills are a bad business risk.
Criminal History: People who have been convicted of crimes are a business risk.
Rental History: People who don't pay their rent or have been evicted are a bad business risk.
Income: People with no verifiable source of legitimate income, or insufficient income are a bad business risk.

Do not rent to tenant applicants who do not meet your Tenant Qualification Standards.
If you make any exceptions to your stated tenant qualification standards, you may be in violation of the Fair Housing Act for singling out certain groups of people for special treatment, better known as discrimination. Protect yourself against discrimination lawsuits by treating all tenant applicants uniformly and avoid making exceptions to your published tenant qualification standards. This way, you won't be providing tenant rejects or government agencies with any legal basis for filing a discrimination lawsuit against you.

Properly Notify Tenant Applicants Who Don't Qualify
Once you have decided to deny a tenant's application based on legitimate business reasons, you must send the applicant a Notice Of Denial To Rent listing the sources of the personal information that was used to base the decision to deny them rent.

This information does not constitute legal advice. The Madison Landlord Council makes no representation as to the legal validity of any provision or the adequacy of any provision in any specific transaction. For legal advice, please contact an attorney familiar with landlord tenant law. A list of attorneys that may be able to assist you and a link to Pre-Paid Legal Services, Inc where MLC members have access to a special association group rate can be found on our website, www.madisonlandlords.com. Pre-Paid Legal Services

For additional information about Pre-Paid Legal Services programs and the family and business legal plans available to Madison Landlord Council members, please contact MLC/Pre-Paid Legal Services liaison, Joe Campana at 244-4772; campana@prepaidlegal.com.