A landlord's most effective tool for choosing prospective tenants is diligent tenant screening, including checking a tenant's credit history and references from previous landlords. Here are some basic guidelines for choosing good tenants (and avoiding legal trouble and the costs of eviction fees and lost rent).
A good rental application should include an applicant's employment, income, and credit information; Social Security, driver's license number, or other identifying information; rental history, including past evictions; and references from previous landlords. The rental application should specifically authorize the landlord to verify the tenant's information and references and to run a credit report. Everyone age 18 or older who will be living in the rental unit should fill out an application.
This key tenant screening tool will tell you if the applicant has filed for bankruptcy, or been late in paying rent or bills, convicted of a crime, or evicted. Depending on the report, you may also get the applicant's credit score. Landlords need to work with a credit reporting agency or tenant screening service to get an applicant's credit report (a local landlord or rental housing association should have recommendations). It is legal in most states to charge prospective tenants a fee for the cost of the credit report itself and the landlord's time and trouble.
Ask the applicant's previous landlords if the tenant paid rent on time, was considerate of neighbors, or caused any problems. Also, contact the applicant's employer to verify income and length of employment. Follow up on any red flags on an applicant's credit report, such as previous evictions.
Federal and state antidiscrimination laws prohibit discrimination on the basis of race, color, or religion; national origin; familial status, disability; and sex. Many states and cities have additional laws prohibiting discrimination—for example, based on marital status or sexual orientation. Fair housing rules apply to all aspects of the tenant screening process, from advertising to showing rental units to choosing tenants. An individual who suspects discrimination may file a complaint with the U.S. Department of Housing and Urban Development (HUD) or a state or local fair housing agency, or sue you in federal or state court.
Your reasons for rejecting tenants should be based on legitimate business standards, such as a history of nonpayment of rent or a bad credit report.
Once you've done a thorough screening of all prospective tenants who want to live in the rental unit, choose a tenant who meets legitimate business criteria, such as a satisfactory credit report, positive references from previous landlords, and sufficient income to pay the rent. Next step is to sign a lease or rental agreement. This key document should cover all important terms, including the amount of rent, deposits, and late rent fees; notice requirements to end the tenancy; and landlord's and tenant's repair and maintenance responsibilities.