3 benefits of 'good landlord' licensing

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Nov. 28, 2011

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Rent it Right

Janet Portman
Inman News™

Q: Our city has just instituted a business license requirement for landlords, including those who, like me, have only one or two rentals. The city council says this will discourage "slumlords." But there are plenty of laws on the books now to deal with bad landlords. Isn't this new fee just a thinly disguised way to generate income for the city? --Wes S.

A: You're not the first landlord to react in frustration at the prospect of having to pay a licensing fee to combat an evil that you feel is better handled in other ways. Another complaint I hear comes from rental property owners who are responsible and have never been accused, by tenants or city authorities, of running a slumlord operation. Why, they ask, should they pay for the bad business practices of others?

Cities have a number of ways to respond to these legitimate complaints, and smart drafters of these ordinances consider them when writing their laws. First, they point out that tenants in many states do, indeed, have remedies when landlords violate the law.

They can, for instance, withhold rent or use "repair and deduct" when owners fail to maintain habitable housing. But when tenants have to resort to such remedies, the problems have, obviously, already happened. It's far better, the drafters argue, to head off landlord lapses in the first place.

To prevent abuses before they occur, these cities use the revenue generated by the fee to educate landlords about the proper and responsible way to run their business. For example, the city may offer classes that teach landlords how to properly screen applicants, handle common occurrences (such as requests for maintenance), and honor tenants' privacy. Importantly, how to handle problem tenants is often on the list: When landlords know their legal options for dealing with these issues, calls to the city police force will decrease.

Thoughtful ordinance writers also address the landlords who are attempting to educate themselves about good rental practices. They give fee discounts to landlords who attend the classes. Of course, going to class and implementing what you learn are two different things, but attending classes is at least a start. Giving discounts to those who have never been the subject of a complaint or court case is another way to reward good landlord behavior.

You might consider one more consequence of a "good landlord" licensing system before you decide that it's a city boondoggle. Many cities allow landlords to display a sign or logo certifying that they have attended the city's educational programs. This is a marketing plus for a landlord, because potential tenants will know that this landlord has been taught the rules regarding maintenance and, importantly, how to screen applicants and deal with problem tenants.

In other words, if you know that your neighbors in a multiunit property have been screened appropriately, and will be dealt with lawfully but firmly if they cause trouble, you may be more inclined to rent at that property.

Q: I just applied to renew my yearlong lease. When I signed the first lease, I paid a $200 pet deposit. Now, they're asking for another deposit, claiming that this is a new lease! Can the owners do this? --Carolyn B.

A: Your landlord may be confused as to the meaning of a deposit. On the other hand, he may simply have misidentified the sum, which should have been called a fee. Whether he can collect such a nonrefundable fee is determined by state law.

A deposit is a sum of money meant to guarantee your performance of your duties as a tenant: to pay the rent and keep the premises reasonably clean and undamaged. Pet deposits, which some states regulate separately, target any damage the pet may cause. The advantage of a pet deposit is that, in some states, it can be charged in addition to a regular security deposit. If the state regulates how much security a landlord may charge, this gives the landlord the opportunity to collect more money. The disadvantage of a separate pet deposit is that it should be used only for pet damage. When human-caused damage exceeds the security deposit, but pet-caused damage is nil, landlords sometimes find it irresistible to keep their hands off the pet deposit. Arguments, and sometimes legal disputes, ensue.

To complicate matters, some states allow landlords to collect a pet deposit that they label "nonrefundable." Because deposits are, by definition, returnable when the depositor performs as required, calling a pet deposit nonrefundable is a most unfortunate contradiction in terms. Collecting a nonrefundable sum to cover pet damage should properly be called a pet fee, which landlords keep even if the pet doesn't cause any damage. But not all states allow landlords to collect such a sum, precisely because it doesn't seem fair to keep money meant to cover damage that never happened. Some, like California, specifically disallow these types of fees.

If your state allows nonrefundable sums meant to cover future damage, your landlord's demand that you pay again for any damage your pet may have caused may pass legal muster. You'll need to find out how your state approaches the tricky issue of deposits and fees.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com.

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