It’s impossible to predict what you will need and when. Relying on memory is a mistake, because over time the details will be fuzzy and what you think you remember won’t help you in court. The only way to win a lawsuit is to establish a paper trail of documentation. You need names, dates, times, what you said, what your tenant said and notes of how and why you made your decisions.
Rejected Applicants
For each applicant, set up a separate folder that contains the rental application, results of the credit check if you did one, employment history, notes on your conversations at the showing and the criteria you used to determine that you would reject the applicant. If you used a worksheet, include that as well as receipts for fees the applicant paid, such as for the credit check. [Editor’s Note: Be sure to keep a copy of the Tenant Rejection Slip you gave/mailed to the rejected applicant. Also, AOA’s form #100S – the Applicant Screening Checklist should be kept in this file.]
File applicants in alphabetical order. You also might want to keep a log of all the people you interviewed as prospective tenants in any given year. Then, if you ever have to search specifically for, say, 2004 applicants, you won’t have to shuffle through every file folder to find them.
Tenant Files
Keep the originals of the signed lease or rental agreement riders, the lease package your tenant received upon moving in, the rental application, credit information and move-in/move-out inspection checklists. Save rent receipts, copies of repair bills, letters, correspondence and dorms. File your requests for entry to the tenant’s apartment, the tenant’s requests for repairs and any tenant complaints. Be sure to date everything and write down when and how you repaired broken or malfunctioning items. You’ll need to keep annual and semi-annual safety and maintenance checklists. Some landlords also keep a logbook of repairs and requests.
Don’t forget to store any pictures or videotape taken during the move-in inspection that show the apartment and existing damage. They are evidence of the condition of the apartment at that time and can be used to prove when damage occurred or to monitor wear and tear of furnishings.
Handling Sensitive Information
Rental applications, credit reports, leases and rental agreements contain a lot of personal information about applicants and tenants. Don’t divulge any of it to anyone and keep these records securely locked up at all times to prevent possible identity theft. In addition, federal law enacted in 2003 the “Disposal Rule of the Fair and Accurate Credit Transaction Act (The FACT Act)” that states when you want to dispose of old records, they must be burned or shredded.
Because the FACT Act requires even small landlords to destroy sensitive information in their tenant and prospective tenant files when it’s no longer needed, it might make sense to establish a system for doing so. Start out by determining how long it is necessary to keep credit records on hand in your state. Find out what the statute of limitation is in your state for filing Fair Housing discrimination complaints. Generally, once that time has passed, you can safely destroy the records.
When you receive sensitive records from prospective tenants, immediately mark their files with the correct purge date. Don’t plan on doing it later because you might forget.
When it’s time to destroy the records, make certain you also destroy the information stored on your computer or handheld personal data system. Experts recommend that you use software that automatically wipes the information off the hard drive; remember it’s not difficult for a computer wiz or hacker to restore materials that have simply been deleted.
Some landlords like to make a copy of their tenant’s rent check each month and attach it to the original receipt for rent – the duplicate goes to the tenant. In addition to assuring accuracy, a copy of the check gives them the tenant’s current checking account number and bank. If rent is shared by roommates, copy the second check too. Store receipts in chronological order and staple them together at the end of the year.
Tenant Schedule
The tenant schedule is a running account of all the tenants who have rented your apartment. Write down their names, telephone numbers, the dates they moved in and out, the due date for the rent, the security deposit they paid and their bank account and social security numbers. Use this schedule as a handy reference guide and for quick access to the information you most often need, but since it contains vital personal information, be sure to keep it locked up as well.
[Editor’s Note: Civil Action Statute of Limitations -The statute of limitations dictates the maximum amount of time someone has to bring a lawsuit. In general, California tenants with a written lease or rental agreement have four years to bring a civil action for violation of the contract. If the rental agreement is oral, the tenant has two years from the date of the violation. Claims based on a violation of statute, such as California Civil Code section 1950.5, which governs the return of the tenant’s security deposit, carry a limitation period of three years.
Tax Man Trouble – If the IRS suspects that you’ve underreported your income by 25 percent or more, it can challenge your tax returns from the past six years. The clock starts ticking on the date you file the return or the due date for filing, if later. If you fail to file a return, or the government suspects you of fraud, there’s no statute of limitation. In other words, the IRS can come after you forever. While it is generally safe to shred old leases after six or seven years, prudent landlords may wish to keep their old tenant documents indefinitely.]
Reprinted with permission of the Wisconsin Apartment Association News.