As a residential property manager, one of your most important responsibilities is selecting tenants who will pay rent on time and care for your property. That’s where a well-organized application process comes in. It helps reduce risks, keeps you compliant with laws, and helps you find high-quality tenants who fit your properties.
The process starts by attracting the right applicants, but it doesn’t end there. You need to thoroughly review applications, check references, and understand legal requirements. In this guide, we’ll walk you through the various components of the tenant application, the screening process, legal considerations, and how to avoid common mistakes. By the end, you’ll have actionable strategies to set up the best possible tenant application process, reduce risks, and build stronger tenant relationships.
Overview of Tenant Applications
A tenant application helps property managers gather the necessary details to assess whether an applicant qualifies for tenancy. The application form generally collects personal information, rental history, employment status, and financial details.
These are the main components of an application you need to include:
- Personal Information (name, contact details, and identification such as a SSN)
- Rental History
- Employment Information
- Credit Check Consent
- Background Check Consent
- References
Each part of the application offers valuable information. They all contribute part of a complete picture to help you determine if an applicant is financially stable, trustworthy, and likely to maintain a positive relationship with your property.
The Tenant Screening Process
Once an application is submitted, the screening process begins. Thorough screening helps you identify any risks associated with potential tenants. Here are the steps you should follow to assess each applicant effectively:
1. Reviewing the Application
Start by checking the application for completeness and accuracy. This step helps you identify any inconsistencies or missing details. A careful review will highlight any potential red flags. For example, mismatched employment or rental history may require further clarification.
2. Conducting a Credit Check
Credit reports give you a clear picture of an applicant’s financial habits. A strong credit score usually indicates the tenant is responsible with money, increasing the likelihood of on-time rent payments. However, don’t base your decision solely on the credit score. Some applicants with poor credit may still have solid rental histories.
3. Background Check
Running a criminal background check helps protect the safety of your property and other tenants. Look for any criminal history or prior evictions, as these may indicate a risk to your property or your other tenants. Comply with legal guidelines when conducting background checks to avoid discrimination claims.
4. Verifying Employment and Income
Confirm the applicant’s employment and income to verify they can afford the rent. Contact the employer or request recent pay stubs. In general, tenants should earn at least three times the rent amount, though this guideline may vary depending on the market.
5. Checking Rental History and References
Contact previous landlords to verify the applicant’s rental history. Ask about payment history, property care, and reasons for moving. Speaking to personal and professional references can give you additional insights into the applicant’s character and trustworthiness.
6. Assessing Red Flags
During the screening process, be on the lookout for red flags, such as:
- Gaps in employment or frequent job changes
- A poor credit history with no explanation
- A history of evictions or disputes with previous landlords
- Criminal records that could affect the safety of the property or other tenants
If you encounter any of these issues, weigh the potential risks carefully before making a decision.
Legal Considerations to Create Compliant Tenant Applications
As a property manager, you must follow legal requirements when processing tenant applications. Violating laws can lead to expensive fines, lawsuits, and damage to your reputation. The section below can help fill you in on some general legal considerations but be sure to speak with a legal professional for specific advice.
1. Fair Housing Laws
The Fair Housing Act (FHA) prohibits discrimination based on race, color, religion, sex, disability, familial status, or national origin. Property managers must treat all applicants equally and avoid policies that could lead to discrimination. For instance, rejecting an applicant based on their race, religion, or family status violates the FHA. Take clear steps to keep your tenant selection process is consistent and non-discriminatory.
2. Anti-Discrimination Policies
Many states and cities have additional anti-discrimination laws that expand on the FHA. These laws may protect against discrimination based on sexual orientation, gender identity, or source of income. Familiarize yourself with local regulations to avoid potential legal violations.
3. Compliance with Local and State Regulations
State and local governments often have rules that regulate the rental process. These can cover everything from security deposit limits to the tenant’s right to dispute eviction. Stay informed about these regulations to keep your tenant application process compliant.
4. Adverse Action Notices
If you reject an application based on information in a credit or background check, you must send an Adverse Action Notice to the applicant. This notice explains why their application was denied and provides a copy of their credit report. Following these steps to stay compliant with the Fair Credit Reporting Act (FCRA).
Common Pitfalls of Reviewing Tenant Applications and How to Avoid Them
Even experienced property managers can make mistakes during the tenant application process. Here are common pitfalls and tips on how to avoid them:
- Failure to Verify Information: Sometimes, property managers skip verification steps, such as contacting previous landlords or confirming employment. Always verify the details applicants provide to reduce the risk of renting to problematic tenants.
- Inconsistent Screening Procedures: Using inconsistent criteria or skipping certain checks can lead to legal challenges or unfair treatment. Apply the same screening process to all applicants to avoid claims of discrimination.
- Poor Communication: Failure to keep applicants informed can create frustration and harm your reputation. Maintain clear communication throughout the application process. Update applicants on their status and provide explanations if necessary.
- Not Keeping Records: Make sure to retain thorough records of all tenant applications, even if you reject them. Document communications, application forms, and background check results to protect yourself in case of legal disputes.
Best Practices for Attracting High-Quality Tenants
Attracting good tenants starts long before you start processing applications. Here are strategies to draw in top-tier applicants:
- Advertise Effectively: Post listings on platforms where your ideal tenants are likely to look. Include clear, high-quality photos and detailed descriptions that highlight the property’s features. Make sure the rent amount and other terms are easy to find.
- Create Transparent and Easy-to-Understand Listings: Be clear about the rental terms from the start. Include your screening criteria, the rent price, and other important information to attract suitable applicants.
- Simplify the Application Process: A straightforward, user-friendly application process can attract quality tenants. Offer online applications, accept electronic payments, and keep applicants informed about timelines and next steps.
- Set Clear Expectations: Clearly communicate your expectations for rent payments, maintenance, and tenant responsibilities. When tenants understand the rules from the outset, they are more likely to follow them, leading to fewer issues down the line.
Tech To Help with Tenant Applications
By developing thorough tenant applications and a consistent, legally compliant screening process, you can confidently select tenants who will respect your property and meet their obligations. Property management software such as Buildium lets you quickly create, share, and review online tenant applications, so you can act quickly to secure your ideal residents. You can give Buildium a try with a guided demo or 14-day free trial.
Whether you are a new or experienced property manager, adopting a well-organized application process and the right management tools will help you avoid common mistakes, reduce risks, and build stronger tenant relationships.
Read more on Leasing
