How Long Should You Retain A Denied Rental Application?

I am often asked by landlords and rental property managers how long they should hold on to the rental applications of applicants that were denied.  

The answer to that question depends on something called the "statute of limitations."  A statute of limitation is a law which sets the maximum period of time in which a person can wait before filing a claim/complaint or lawsuit against another person.

The statute of limitations for a rental applicant to file a federal fair housing (discrimination) complaint against a landlord for failing to accept his/her application is 2 years.  The statute of limitations for a state fair housing (discrimination) claim to be filed is shorter -- only 1 year. 

So what this means to you is that you MUST retain all rental applications and any other related documentation, such as credit reports, criminal reports, questionnaires sent to current or prior landlords, CCAP printouts showing past evictions etc. etc., for at least 2 years from your last interaction with an applicant that did not become your tenant.  You will also want to save for the same period of time, the specific written screening criteria that you were using at the time that you processed and rejected the application.

If you fail to do this then you may end up in the unenviable position of trying to defend yourself against a fair housing (discrimination) claim brought by a disgruntled applicant that you have no memory of and you will not have any documentation that you can refer to in order to defend yourself.  While there is a strong likelihood that you will not remember each and every rental applicant that you have interacted with in the last 2 years, it is important to note that a denied applicant will always remember you because in their mind you are the person that denied them housing for discriminatory reasons.

You never, ever want to be stuck in a  "He Said, She Said" situation.  A "He Said, She Said" scenario is one where the denied applicant is saying that you denied their application for reasons in violation of the Fair Housing laws and all you can say in reply is "No, that is not true" but you have nothing but your word to refute the allegations.  Landlords and Property Managers always want to be in a position where they can produce written evidence to support their non-discriminatory reasons for denying an application.  And that can only be done if you retain all denied rental applications, written communications, and other relevant documents related to your decision, until the statute of limitations has run. 

Screening Prospective Tenants Is a Must --- That Includes Commercial Tenants

Those of you that have attended my seminars or read prior blog posts of mine are well aware that in my opinion screening prospective tenants is the single most important part of landlording.

These sentiments apply to commercial tenants as well as residential tenants. Just because your tenant is a corporation, LLC or some other business entity does not make make them legitimate.

A corporate tenant can also fail to pay rent, damage your property, and otherwise be a nightmare. In fact some tenants can hide behind an empty shell of a corporation (or partnership or LLC) and actually turn out to be a commercial tenant from hell.

I was recently interviewed by Colleen Henry of Ch. 12 News about one such "professional" tenant from hell. This tenant moved her business into her landlord's rental unit and refused to move out even though she had not paid rent for months. She bounced her check for the security deposit. She bounced her check for the 1st month's rent. She refused to make any other rental payments. She ignored her landlord's pleas to pay rent or move. Once her landlord began the process to evict her, she filed bankruptcy. By doing so all creditors, including her landlord, were precluded from attempting to collect from her (including the filing of an eviction action against her) until they received permission from the bankruptcy court. And this wasn't the first landlord that this tenant did this to. She had done this to landlords before.

Tenants such as this one make good landlords want to get out of the business.

My recommendation to landlords who are or have been in this difficult situation is not to give up and get out of the business but rather take the time to educate yourself about landlord tenant law so that you are better equipped to handle such a situation in the future. Chances are the better educated you are the better chance that you will not rent to the tenant from hell because you will have learned enough to know that you ALWAYS, ALWAYS must screen your tenants before signing a lease and/or handing them the keys to your property.

Top 10 Pitfalls That Landlords Should Avoid

Those of you that missed the last AASEW membership meeting on Monday, April 15, 2013, missed a great meeting and a great presentation. The featured presenter was John "Dr. Rent" Fischer, a Wausau-area landlord and rental property manager, who spoke to a packed house that Monday. John's presentation was dynamic, educational and at times pretty darn funny.

With John's permission, I am providing you with a link to John's handout from the meeting which was entitled "Top Ten Pitfalls That Landlords Should Avoid."

Like any good Top 10 list (a la David Letterman), John presented these pitfalls in reverse oreder based on importance. The pitfalls to avoid included:

10. Mailing the 5 Day Notice

9. Digging The Hole Too Deep

8. Incomplete Applications

7. Not Asking The Right People (about your rental applicant)

6. Auto-Renewing A Lease

5. 14 Day Notice (or NOT)

4. "Do-It-Yourself" Leases or Rental Forms

3. Misuse of CCAP

2. Carpet Cleaning

1. That Lease is HOW LONG?

As John stated during his presentation, there are a lot of things that are beyond our control that make life as a landlord very difficult at times. As such, we certainly do not want to make life more difficult for ourselves based on a lack of knowledge of landlord-tenant laws . . . unless we are masochists, that is.

The AASEW has another great meeting scheduled for May 20, 2013 at 7 pm at the Best Western Midway in Brookfield about "How To Finance Real Estate Transactions In The Current Economy."

You Will Not Want To Miss AASEW's Fourth Annual Landlord Boot Camp on Saturday Feb. 25th

Landlording can be pretty complex, with a seemingly never ending myriad of paperwork, rules, landlord-tenant laws and simple mistakes that can cost you thousands of dollars.

The Apartment Association of Southeastern Wisconsin's Fourth Annual “Landlord Boot Camp” can help you navigate these treacherous waters and teach you how to run your properties with greater profit and less hassles.

I have given similar landlord-tenant law seminars to fellow attorneys, landlords, and property manager organizations throughout the state for other state-wide semianr companies that charge attendees $300-$400. This is your opportunity to learn all of the same information at a huge discount through the Apartment Association.

Who: Taught by Attorney Tristan R. Pettit (who drafts the landlord tenant forms for Wisconsin Legal Blank)

When: Saturday, February 25th, 2012. 8:30 am – 5 pm

Where: Clarion Hotel 5311 S. Howell Avenue, Milwaukee [Map]

Included: 100 plus page manual/outline to help you put what you learn into practice plus helpful forms.

Cost: $159 for AASEW members and $249 for non-members. If you are not a member of AASEW but are a member of another landlord/apartment association the cost to attend will be $199.

Specials: Not a member? Pay just a dollar more and enjoy a 2012 AASEW membership.

Wisconsin landlord-tenant laws are constantly changing. To help keep you up to date we offer prior attendees a $50 discount.

Sign up by going to the AASEW's Landlord Boot Camp landing page where you can sign up online and pay via PayPal.

What you will learn at the Apartment Association's 2012 Landlord Boot Camp

Landlord Boot Camp covers everything that you need to know about residential Landlord Tenant law in Wisconsin, including:

1. How to properly screen prospective tenants.
2. How to draft written screening criteria to assist you in the selection process and protect you from discrimination complaints.
3. How to comply with both federal and state Fair Housing laws including how to handle with “reasonable modifications” and “reasonable accommodations” requests.
4. How to legally reject an applicant.
5. What rental documents you should be using and why.
6. When you should be using a 5-day notice versus a 14-day notice, 28-day notice, or 30-day notice and how to properly serve the notice on your tenant.
7. Everything you wanted to know (and probably even more than you wanted to know) about the Residential Rental Practices (ATCP 134) and how to avoid having to pay double damages to your tenant for breaching ATCP 134.
8. When you are legally allowed to enter your tenant’s apartment.
9. How to properly draft an eviction summons and complaint.
10. What to do to keep the commissioner from dismissing your eviction suit.
11. What you can legally deduct from a security deposit.
12. How to properly draft a security deposit transmittal / 21 day letter.
13. How to handle pet damage.
14. What to do with a tenant’s abandoned property and how this may affect whether or not you file an eviction suit.
15. How to pursue your ex-tenant for damages to your rental property and past due rent (and whether it is even worth it to do so).

. . . and much more. There will also be time for questions and answers.

You get all this for less than you would pay for an hour of an attorney's time.

Last year’s AASEW Landlord Boot Camp was filled to capacity and we even had to turn a few people away. So call early to reserve your spot.

Call the Association at (414) 276-7378, email membership@apartmentassoc.org or go to our Landlord Boot Camp landing page to sign up online and reserve your spot.

Remember that “landlording” is a business — so take the time to educate yourself on how to better manage your business and avoid costly errors!

Rejecting A Rental Applicant: The Do's and Dont's

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.

Let's face it, most landlords would prefer to never have to reject a rental applicant. It would be great if every application that we received from a potential tenant passed muster -- great credit, no prior evictions, awesome job history etc. etc. Unfortunately, most of the time that is not the case. Depending on how tough your screening criteria is, some of you may be rejecting a lot of applicants. It is not fun rejecting a rental applicant, but it goes with the job of being a landlord -- it needs to be done.

I would strongly suggest that if you have not read my prior post on written rental screening criteria that you do so before reading the rest of this post. Understanding what written screening criteria is and how to use it properly, will be very helpful in getting the most out of this post.

So how does a landlord go about giving an applicant the ol' rejection? In most areas of Wisconsin, a landlord is not required to provide a reason for denying a rental applicant. While this may not seem "fair" - it is legal -- in most areas of Wisconsin.

CAVEAT: Those of you that have read my prior posts know of my fondness for the city of Madison and Dane County -- sarcasm intended. Well you guessed it, Dane County and "Mad-Town" are a little different in that they require landlords to provide a rejected applicant with an explanation for denying them rental -- and the explanation must be in writing. So if you own or manage rental property in either of these liberal bastions, I would suggest that you spend some time reviewing the Dane County ordinances and the city of Madison ordinances . .. . then reconsider owning rental property in these areas : )

All kidding aside, there is not one correct way to deny a rental applicant. All landlords handle this situation differently depending on the specific facts of the situation. Each of my landlord clients handles the rejection of a rental applicant differently. For instance, some landlords choose to tell the applicant why they were denied while others refuse to do so. Both ways are legally acceptable (except in Dane County and City of Madison)

I would encourage any landlord that does want to provide a reason for the denial to the applicant, to insure that the reason they are denying the applicant complies with the landlord's written screening criteria, that the screening criteria used does not run afoul of any fair housing laws, and that the reason for the denial is not discriminatory. If you are not sure that your screening criteria is legally valid -- or you have never heard of the term screening criteria before now -- than you should probably avoid giving a reason for the denial.

I know of several landlords who require the applicant to put their request in writing in order to receive a reason for their denial. If they receive the written request, then the landlord will provide a written explanation. Oftentimes the applicant will not take the time to make the written request and the landlord has avoided the need to provide the explanation.

There is one specific context in which all landlords MUST provide an applicant with a written document -- not a written explanation for why they were denied -- but a written document referred to as an "adverse action letter."

If a landlord rejects a rental applicant because of something obtained from the applicant's credit report, the federal Fair Credit Reporting Act requires that the landlord send the applicant an "adverse action notice" advising them that they have been denied rental in part due to information obtained from their credit report.

An adverse action notice must include the following information:

1. The name, address, and telephone number of the credit reporting agency that supplied the credit report.

2. A statement that the credit reporting agency that supplied the report did not influence the landlord's decision to reject the application.

3. Advise the rejected applicant of his/her right to dispute the correctness or completeness of the information from the credit reporting agency and the applicant's right to obtain a free copy of their credit report from the agency within 60 days, if requested.

So, actually an adverse action notice does not require a landlord to state the reason that a rental applicant was denied, but it does tell the rejected applicant that the decision to deny their application was, at least in part, based upon something learned from the applicant's credit report.

Personally, I provide any applicant that I reject with an explanation. My reasons for doing so are threefold:

1. If I was being rejected for housing I would like to know why so I could see if the reason is something that could be corrected in the future. This is NOT a legal reason for providing the applicant with an explanation but rather a personal one -- a variation on the concept of treating others as you would like to be treated.

2. I believe that if I provide a rental applicant with the truthful (and legally valid) explanation as to why I will not be renting to them, they will be less inclined to incorrectly assume that I denied them based on discriminatory factors.

3. I'm well-versed in fair housing law and am confident that the basis for my decision to deny a rental applicant is not in violation of federal or state fair housing laws and that my decision can be legally supported.

As mentioned previously, if you do not know if your reason for denial is legally justifiable, then you need to be cautious in what you tell an applicant. You certainly don't want to end up providing the applicant with the only evidence that they need to file -- and win -- a fair housing claim. If you find yourself in such a situation, I would recommend that you seek legal advice before you make the decision to deny the rental applicant.

Whether you have decided to provide an applicant with an explanation as to why they were denied rental or not, all landlords and property managers should memorialize the reason that they rejected the applicant in writing for their own records. If you are utilizing written screening criteria -- which I hope everyone is -- then a copy of the criteria is the perfect place to record the reason for denial. Simply circle the specific criteria that the applicant failed to meet. You should also attach any supporting documentation -- such as a copy of the applicant's credit report, CCAP printout showing a prior eviction, or notes from your conversation with the applicant's current or past landlord where s/he told you the applicant was always late with paying the rent etc. etc. Finally, be sure and notate when you made the decision to deny the applicant and when that was communicated to the applicant. You should retain this paperwork for at least three years as this is the statute of limitations for the majority of most fair housing claims.

Rejecting a rental applicant can be an uncomfortable situation and even an anxious one if you are not educated about written screening criteria and when you can legally reject an applicant. If you would like to learn more about these topics you should consider attending the AASEW's Landlord Boot Camp which will focus on these topics more in depth.

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.