Many owners believe in collecting a large number of applications and processing all or some in order to “pick” the best applicant. This procedure is fraught with dangers for any owner who is required to comply with federal, state or local Fair Housing laws. That means virtually every property owner in America. The selection of the “best” resident candidate will require an owner to make a selection based upon non-standardized, discriminatory criteria. For example, if two fully qualified households apply but one is a single person and the other a family with two children, the choice of the single person because there is less wear and tear on the apartment might be a logical business choice. But, it would be a blatant violation of Fair Housing laws as it is discriminatory against the family.

There is no method that MyRentalUnits is aware of to allow an owner to accept and process multiple applications that will not routinely result in Fair Housing violations, no matter how well intentioned the owner is or how committed they are to the principles of Fair Housing.

MyRentalUnits strongly recommends that all owners and managers process applications on a first completed and submitted, first processed basis. If the submitted application is found to be incomplete, it should not be processed. Begin processing the next application. Backup applications can be accepted and should be encouraged. If not processed, all deposits and fees should be returned in full. Applications should not be treated as a profit center.

Here is a link to an article on www.NuwireInvestor.com about Screening Tenants.

Application Tracking

If you have more than a couple of applications per year, set up a tracking system in a database or a spreadsheet . In the database, include the applicant name, date of application, check numbers of any received payments, address of the unit applied for, and the disposition of the application (accepted, denied, accepted with change of terms, or incomplete). Assign each entry a distinct tracking number.

Keep this tracking list with your denied and incomplete applications for no less than three years. MyRentalUnits.com recommends that all of these applications be kept in a single location, file folder or box for ease of locating them.

Tracking number systems can include the year, month and date as part of the number. For example, a system might include 2006.07.142 (or 200607142) to show the application was the second application received on the 14^th of July, 2006. This kind of system can make it easier to find information or missing documents.

Application Fees

Application fees have been collected by owners for many years. Unfortunately, it was during a tight California rental market when some owners were collecting large up-front fees and never processing the applications. Then California began to regulate application fees. 

Application fees in California are regulated by the Civil Code.   When this law went into effect, the maximum fee an owner could collect was $30. The allowable fee adjusts annually per inflation.  The current maximum is just over $35.00, as calculated by the California Apartment Association.

In order to collect an application fee, and owner or manager must disclose to the applicant the actual costs associated with the fee. Charges cannot exceed actual costs. Fortunately, “soft costs” can be included in the cost analysis.

The disclosure language should be something like this:

[recommended language currently being drafted]

This disclosure must be given to the prospective resident or applicant at the time the fee is collected. Most landlords use a receipt system whereby the applicant signs acknowledging the disclosure.

My Rental Units recommends:

• Be sure to keep the signed receipt or disclosure with the application so you can easily prove the disclosure was given to the applicant.
• Remember that rejected or incomplete applications should be kept for at least three (3) years from the date of the application.
• The application of an approved applicant (now resident) should be kept for at least three (3) years from the time of move out.

Last Revision:  10.11.08

V. 1.03