5 Common Problems with Lease Applications

Look out for these common problems

As you navigate the rental application process, one of the most important tools in your arsenal is the lease application. Yes, this form is designed to provide you with the information you’ll need to decide who to rent to. By now you’ve probably gotten a great idea of the information on the rental application and how you can use it.

But the tenant application form you use serves another critical purpose. It is the foundation for how you conduct your tenant screening process. That means that there is a very significant legal impact depending on the lease application you use:

With a thorough lease application, you greatly reduce your legal risk while maximizing your chances of landing a decent tenant. However, an ill-conceived tenant application form can land you in substantial legal trouble.

You should not blindly trust a lease application to protect you. To make things easy for you, we’ve broken down the top 5 problems we see most on lease applications. Those five problems are:

  1. Asking discriminatory questions
  2. Not collecting key details for screening
  3. Not providing required applicant notices
  4. Not collecting applicant authorizations for screening
  5. Mishandling screening fees

It’s critical that you take a few minutes to check your tenant application form to make sure you are covered against these pitfalls:

Your lease application asks for discriminatory information

One of the most common problems we see on lease applications is over-enthusiastic information gathering. Many people believe in “bigger is better” and that more information collected translates to a more successful tenant screening process. This is far from true. In fact, a better mindset would be “less is more”. That means collecting only the information that is directly relevant to the decision you’ll be making and nothing more.

Limiting the information you collect has two important benefits:

  1. Reducing the sensitive information you handle so you don’t have to worry about the responsibility of properly safeguarding extra information.
  2. Lowering the chance of discrimination claims from disgruntled tenants. If you don’t collect any information that can be used in a discriminatory manner, how can you possibly engage in discrimination?

For the purposes of this article, we will focus on the anti-discrimination perspective.

Most tenant application forms we see follow similar patterns of asking for questionable information. Here are the top questions that should not be included on the lease application you use:

Friends talking in a group

1. Social Security Number. First of all, many applicants do not have an SSN (some have ITIN, etc.). To require an SSN on a lease application could be seen as discriminating against applicants based on their immigration status. Second, you need to take a moment to think about why you’re asking for an applicant’s SSN.

Most agents and landlords today use some form of online tenant screening that allows tenants to input their own SSNs to generate screening reports. That means you don’t need the SSN to run screening reports.

That brings us to your likely next thought: “Don’t I need a social security number in case I have to evict someone?”

Most people think the answer is “yes”. But some further digging would tell you that the social security number may not be needed at all (depending on what state you’re in). For example, a California Unlawful Detainer for Eviction (form SUM-130) does not ask for the SSN.

If you’re reading all this and still thinking that you want to collect SSNs from your tenants, you’re not alone. However, you should still reconsider collecting SSNs on your lease application. So if you take anything away from this, remember that there’s no reason to collect an SSN from everyone who applies, only from those you rent to. This can minimize your liability, and you can still collect an SSN from your actual tenants.

2. Date of Birth. This is another common piece of information collected on most lease applications. It may not be bad to include it – if you’re going to be using the information to pull their credit report yourself. But as we’ve mentioned, if you’re you use an online tenant screening service like most agents/landlords, you won’t need the DOB.

It’s a common misconception that the DOB can be factored into a decision. In fact, collecting and using an applicant’s DOB can violate the Fair Housing Act because you could be discriminating based on age.

The bottom line is that unless you need the DOB to run screening reports, make sure it’s not on your tenant application form.

3. Service Animals. We’re not suggesting that you stop asking about pets on your lease application. We are letting you know that you should be extra careful when dealing with applicants who may have a service animal.

The main difference between a pet and a service animal is that a service animal usually serves a medical purpose. And because you cannot choose tenants based on their medical condition, you would be wise to avoid asking about service animals on your lease application. Doing so opens you up to being accused of discrimination if you don’t accept the tenant. Tenants can do everything from file a complaint with a fair housing agency or file a lawsuit against you. Either one can end up costing hours of time and thousands of dollars.

4. Place of Birth. Many lease applications ask for an applicant’s place of birth. But in the end of the day, this information is not related to your decision and can be construed as discriminatory against applicants based on nationality.

To protect yourself, you should avoid using a tenant application form that asks for a tenant’s place of birth.

5. Citizenship Status. This is another big one that should never make it into your decision-making process. Someone’s citizenship status may influence where he or she is able to work, but it should not impact a housing situation.

6. Gender. In California, discrimination based on gender and gender identity is prohibited. Gender is also a federally protected class. For these reasons, you should reconsider any rental application that has gender as a question. The last thing you need is the perception that gender is part of your selection criteria.

7. Race. Ethnicity and race should not be mentioned during the screening process. It has no bearing on whether a tenant will be good or not. Do yourself a huge favor and make sure that race has no place in your selection criteria.

8. Arrest Record. Some lease applications contain questions relating to criminal history. In some cases, this can be okay. However, you need to understand the distinction between an “arrest” and a “conviction”. Generally speaking, you can not use information about arrests in your screening process. That is because an arrest does not necessarily mean someone did something wrong. I.e. someone can be arrested and found innocent in court.

For this reason, you should be extremely careful with how you collect and use criminal information. Make sure your tenant application form does not have a question about arrests. If anything, asking about prior convictions may be a safer bet.

Your lease application doesn’t collect enough information

One thing that can be just as bad as asking for discriminatory information on a lease application is not asking for enough information. There are certain pieces of information that are imperative to successful tenant screening. Without them, you may not be getting the full picture of an applicant. The more information you miss, the higher likelihood that you end up with a problem tenant. Mistakes like that can cost you thousands of dollars.

Most of the information you’ll need will be included on a lease application. But we’re here to tell you the most common questions that many applications miss. You should make sure that your tenant application form collects all of this information:

1. All previous residence history. Many lease applications ask only for basic information on current residence and stop there. Well, that is only the start of the residence information required for successful screening.

  1. For starters, you’ll also want to get the information for all previous residences. This is especially important because current landlords that you contact may not give a complete picture of an applicant if they just want that person out of the property! Get all the previous residence information and make sure you follow through by checking into all of it.
  2. All residence information you collect should include the reason the applicant left. Understanding the motivation for an applicant leaving can give you a great idea for how the applicant behaves. For example, an applicant leaving for a new job opportunity says something different than an applicant leaving because he or she could not afford the rent any longer.
  3. In every case, you need to make sure you have the contact information for all current and previous landlords. What good is all the information on the lease application if you have no way to verify its accuracy?

Tax return income proof

2. Detailed employment/income information. When looking at employment information, you need to make sure applicants have a steady and verifiable income. Just asking for the income amount and source will not help you to properly vet each tenant.

  1. You need to make sure you get all the necessary contact information in order to confirm employment/income. If the applicant is employed, that means you’ll want the phone number, address, and email of the employers. If the applicant has other income sources, your lease application should collect the information you need to properly verify everything.
  2. Whatever income is listed on the tenant application form, it also may be necessary to collect supplemental documents to verify. This includes documents such as paystubs, bank statements, W-2s, and more. Don’t be afraid to request these documents in order to protect yourself.

3. Other occupants. There are a few considerations you must remember when renting a unit out to multiple occupants. The right lease application can assist you with this.

  1. Do the occupants meet your minimum income requirements? Maybe a single applicant does not have enough income to meet your required income to rent ratio. If that applicant has a co-applicant who plans to live in the unit as well, that can tip the scales toward a viable situation. That’s why a lease application should have a section where you can see the other occupants. Not only will you know who you need to screen, but also you’ll be able to properly factor in all the income that can be contributed toward rent.
  2. From a practical perspective, it’s also a good idea to know how many people will be occupying the unit. For example, you may not allow 7 people to occupy your 2 bedroom apartment. This is a purposefully extreme example because it can be very difficult to set hard and fast rules on the number of occupants you’ll allow in the unit. For example, such criteria may have an adverse impact on families, and that can get you into trouble. Nonetheless, it’s important to know who will be residing in the unit.

Man on computer filling out application

Your lease application doesn’t provide required notices

As we talked about earlier, your lease application is setting up a framework for how you will conduct the entire tenant screening process. So there are a few additional functions that your tenant application form should carry out. These functions relate to notices about any screening reports you’ll be running.

Your lease application doesn’t have to include these notices, but in most cases the notices are required so it makes things easier if your lease application covers it for you. That way you don’t have to take additional steps on your own.

1. Which screening reports will be run? Applicants should be made aware of which screening reports will be run on them before the apply. That way, they can ask questions or choose not to move forward if they are not comfortable with having those reports run. This mainly entails consumer reports and investigative consumer reports (aka credit reports, background checks, and eviction reports). Having a disclosure about these reports on your lease application protects you and eliminates extra steps you may have to take.

2. Ability to get a copy of the report. Many states mandate that applicants can get a copy of screening reports if they pay a screening fee. Your tenant application form should let applicants know of this fact if your state law requires it. For example, California Civil Code requires that applicants can check a box on whether or not they’d like to receive copies of certain reports that are run.

3. Which provider is running the reports. If you are going to be running screening reports, it may again be a requirement for you to let the applicant know the name, address, and phone number of the company who will be running those reports. It helps if this information is included on your lease application so you don’t have to provide this information elsewhere.

Your lease application does not include proper authorizations

Another important function of the tenant application form is to collect the required authorization from tenants for you to carry out the tenant screening process. These authorizations allow you to look further into the applicant’s history so you can make an informed decision.

1. Running screening reports. Whether you’re accessing screening reports through an online service or running them yourself, you must have the applicant’s authorization prior to moving forward. This is true with credit reports, and even more critical if you are running background or eviction reports. Applicants can authorize the running of reports electronically on an online lease application, or by signing a paper application. Either way, he or she must agree to a written statement that allows you to access screening reports.

2. Contacting references. We talk a lot about verifying the information you receive on a tenant application form. This includes reaching out to current and previous employers/landlords. In theory this is simple enough. But in practice you need to make sure you’re taking the proper steps to do things the right way. That’s why your lease application should always include some kind of authorization allowing you to contact an applicant’s landlords, employers, and references. If it does not and you still contact those individuals, you may come under fire.

3. Accuracy of information. Your lease application also serves as a great paper trail for how your tenants represent themselves. If a tenant turns out to be a problem and you find out that he or she lied about important application items, you’d be wise to refer back to the tenant application form to know exactly what was and wasn’t said during the application process. That’s why most lease application require each applicant to certify in writing that the information he or she filled out is correct. If you ever need to take action against a tenant, it can really help having a record to establish what the tenant said.

Woman holding wallet showing credit card

Mismanaging screening fees

The time when you collect a lease application is usually the time when you also collect a screening fee. This may sound like a simple practice, but there are a few really important factors to consider as you collect screening fees. It’s pretty easy to miss a detail and do something wrong. So when you collect a tenant application form, be sure you’re also handling screening fees the right way.

1. Overcharging. Make sure you know the maximum allowed screening fee for your state and do not charge the tenant more than that amount. In California, the maximum screening fee you can charge for 2018 is $49.12. Keep an eye out for changes and make sure you educate yourself on how much you can rightfully charge.

2. Not returning unused fees. Screening fees are not designed for you to make a killing in profit from screening tenants. They are there to cover the costs you incur directly relating to the screening process. This includes any amount you pay out of pocket to get screening reports and can also include any indirect expenses relating to the time spent screening a tenant. These costs should all be documented. If you collect a screening fee and do not incur all or some of the costs associated with screening, you should return the fee to the applicant. For example, if you collect a screening fee and the property becomes no longer available before you can finish vetting an applicant, you should return the amount collected minus any time you spent so far on screening.

3. Charging couples a discounted fee. Many agents/owners we speak with tend to charge couples a discounted screening fee compared to the full price they normally charge. For example, they may charge $30 per applicant, but only $45 total to screen a couple. This may sound like a nice thing to do for couples, but in reality, they’re actually discriminating against single people (which is against the law). Make sure that you treat all applicants the same way regardless of their marital or familial status.

4. Not providing an itemized receipt. If you charge a screening fee, you may be required to provide an itemized receipt of costs for applicants who submit a lease application. Make sure that you check on applicable law and are providing this if it is required.

5. Not providing a copy upon request. Many states require that you provide a copy of any screening report ran if an applicant requests them. If you receive such a request from an applicant, make sure you look into it and provide a copy of all reports ran in a timely manner.

You are responsible for the lease application you use

In closing, you need to make sure that whatever lease application you use is properly vetted by yourself and/or an experienced landlord tenant attorney. There are many ways in which a poor tenant application form can come back to bite you. Don’t just use any old rental application and think you can claim ignorance to the wrongful information included. You are responsible for how your run your business, so take a few minutes to review the lease application you are using.

Continue on to the next section to see how to identify these 10 red flags on an apartment rental application.