Application Process

Renting a vacancy is a part of landlord's life.  You do not want your apartment sitting vacant for too long, but you also don't want just any Joe Schmoe moving in.  Here are my suggestions for your application process:

MAXIMUM APPLICATION FEE

As of 2017, the maximum allowable application fee is $47.72 per applicant.  The landlord is required to provide an itemized receipt of what the application fee is applied to - so make sure it reasonably covers your out of pocket expenses and your time to process the paperwork - call previous residences, employers, etc.  The landlord must return any unused portion of the fee if they did not do everything itemized, such as call references, etc.

2017 = $47.72

2015 = $46.67

2013 = $45.99

2012 = $44.51

2011 = $42.41

2009 = $42.06

Civil Code Section 1950.6. The maximum fee is adjusted each year based on changes in the Consumer Price Index since January 1, 1998.

Consumer Affairs Website

CAA Website Update

Also under General Information > Application Fee - Civil Code Section 1950.6, updated 6/12/17

QUALIFICATION CRITERIA

To avoid discrimination and Fair Housing claims, make sure you know what you are looking for in your new prospective residents.  Giving a written Qualification Criteria with each application allows the prospective tenant to pre-qualify themselves, knowing what you require to get approved.  Just keep in mind that your criteria may vary based on location.  Here are some points to consider when you write your own Qualification Criteria:

Proof of Identity - they should be able to provide you with a government issued photo ID and a copy of their social security card or tax ID number.  If they are an international applicant and do not have a social security number, you may want to consider running a name and birthday check (sometimes people lie and say they don't have a social because they have bad credit and the name and birthday check may find matches).

Age Requirements - all applicants over the age of 18 should fill out an application, submit all supporting documents, and sign the lease contract.

Occupancy Standards - there are 2 ways to establish your maximum occupancy

    1) "2+1 Rule" – 2 per room, plus 1:

        a. Studio = 2

        b. One bedroom = 3 

        c. Two bedroom = 5 

        d. Three bedroom = 7

     2) BOCA Code:

    Every dwelling unit must contain a minimum gross floor area not less than 150 square feet for the first occupant and 100 square feet for each additional occupant. Every room occupied for sleeping     purposes by one occupant shall contain at least 70 square feet of floor area, and every room occupied for sleeping purposes by more than one person shall contain at least 50 square feet of floor

    area for each occupant.

    In determining floor areas for rooms occupied for sleeping purposes, the term "floor area" shall not include floor area of halls or walkways, bathrooms, stairs, kitchens, laundry areas, closet or other     storage areas, but may include dining room areas where consistent with other provisions of the BOCA code.

    Any occupancy standard which requires occupancy by fewer persons than would be allowed by this standard will be carefully examined under the disparate impact theory of discrimination.

    Justifications by respondents for such policies will be evaluated to determine whether or not they constitute a business necessity and whether there are less discriminatory, alternative means to

    accomplish the business necessity justifications, based on existing Departmental guidance on application of the disparate impact theory.

    In those few cases where a local, state or federal restriction (other than federal restrictions issued by this Department, which will be governed by this memorandum) requires a maximum occupancy     which is lower than that authorized under the BOCA code, the restriction will be evaluated to determine whether it is reasonable, consistent with Section 807(b)(I) of the Act.

Income Requirement - gross income should be at least 3 times the amount of market rent, combined between all qualified applicants.  Proof of income can be: 

• 2 consecutive pay check stubs

• most recent tax return

• proof of additional income - such as child support or alimony

• proof of social security income, disability or other government income

• proof of retirement or trust fund income

• current offer letter for income/employment verification

• provide proof of assets that meet the income requirement

• self-employed must provide previous year's personal income tax return and 3 months of personal bank statements as evidence of sufficient income. Applicants that have a tip, bonus or commission based employment will be considered self-employed.

• financial aid documentation from the students school that clearly states portion designated for housing

• students that their income does not meet the requirement may need a qualified cosigner

Credit - you need to make a decision what kind of credit you are looking for your property.  My suggestion would be no more than 25% derogatory credit.

Collections - this ,may fall into the 25% derogatory credit, but also make sure that none of the collections accounts are from previous landlords or utility companies.  If they owe former landlords and/or utility companies money, do you really want to risk being their next victim?

Bankruptcy - if you do consider someone with a bankruptcy, make sure it has been discharged for at least 2 years and they have re-established positive credit since.

Residency History - verifiable residency history for the last 2 years.  NO EVICTIONS ALLOWED!!!  Avoid family as previous landlords, if possible.  Try to get the last 2 legitimate landlords; the current may not be as honest as they should be if they are trying to get rid of a problem tenant, so call the previous landlord to find the best information about what kind of tenant this applicant was.

Criminal History -  On April 4, 2016, The U.S. Dept of Housing and Urban Development (HUD) released the Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.  

Landlords cannot have a policy or rental criteria to exclude potential renters because of one or more prior arrests without convictions.  Use of an arrest record would constitute a violation of the Fair Housing Act.

Convictions including, but not limited to theft, forgery, fraud, assault, robbery, and violence can result in denial, BUT housing providers must be able to prove their rental criteria is necessary to achieve a substantial, legitimate, nondiscriminatory interest and take into consideration such factors as the type of crime and the length of the time since conviction.  See Part III Section B.2.

See April 216 HUD EXO Guidance attachment.

Co-Signers - do you want to accept co-signers?  Some things to consider:

1. If you accept an out of town co-signer, if you want to take them to Small Claims Court, you will have to file the suit where they are - local co-signers only!

2. When the initial contract expires, so does their financial responsibility, unless they sign a new so-singer agreement for a new term.

3. If you really want to consider a co-signer, I would suggest it would be for lack of income, lack of credit or lack of residency history.  It should not substitute for bad credit, evictions or negative rental history.

4. Co-signers need to completely fill out an application, and get it notarized (if you decide to go with out of town applicants).

5. Co-signers income should be at least 5 times the market rate - since they will have their own household to support and will need to be able to support your unit, if they prospective residents fall short.

There is one exception with not accepting co-signers:  IF a tenant with a disability has insufficient income, but meets your other criteria, you should at least consider the allowing a co-signer for the income if the co-signer meets your criteria and is stable.  This wold be considered a reasonable accommodation to provide Fair Housing to someone with a disability.

HOLDING DEPOSIT AGREEMENT

Should you decide to accept a holding deposit to take an apartment off the market, you definitely need to make sure you have a written and signed agreement in place.  If you do not have an agreement in place, and they cancel, you have no recourse to keep the money.  Get a holding deposit agreement signed with clearly laid out terms.  Here are some suggestions:

1. Names of residents and occupants

2. Address of the unit they are renting

3. Expected move-in date

4. Lease charges - rent, security deposit, etc

5. Amount of holding deposit

6. Terms of the hold - "Holding deposit refundable within 72 hours.  If they cancel after 72 hours, they forfeit the deposit."

7. Suggestion, do not hold an apartment off the market for longer than 14 days.

See attachments below for a sample Holding Deposit Agreement.

SECURITY DEPOSIT

You may collect up to 2 times the monthly rent for unfurnished units or 3 times for furnished units.  This includes all additional deposits for pets, keys, etc.  Remember, there is no "last month's rent" in addition to their security deposit.  Do NOT collect a last month's rent.  In California, anything collected at move-in after the first month's rent is considered a refundable deposit.

If you do collect additional deposit for pets, keys, etc, make sure you call it "additional deposit" instead of "pet deposit."  Additional deposit is considered Security Deposit and may be used for any damages or monies owed at move out.  IF you call it "pet deposit" and their pets did not cause any damage, but the resident leaves owing you money, you will be required to return the "pet deposit" instead of applying it to their balance dues.

TENANT SCREENING

When you have received your prospective resident's application, proof of income and application fees, use a professional tenant screening company to pull a credit report, eviction report and criminal report.  Review it with your Qualification Criteria to see if they meet it.  If they do not, do not forget to send them a Denial Letter, as required by law.  If they request a copy of their credit report, they are entitled to one since they paid for it.  Make sure it is the consumer version with the required disclaimer verbiage.

APPROVING WITH CONDITIONS - there are times when your applicants are very close to meeting your criteria and you may want to consider approving them.  If you do approve them, you can do so under the condition that they pay a higher deposit.  Just remember their total deposit does not exceed 2 times the monthly rent for unfurnished or 3 times for furnished units.