As I mentioned in a previous post, the Minnesota State Legislator passed a set of new laws that are being called the Tenant’s Bill of Rights.  The Minnesota Multi-Housing Associations represented all landlords and help the authors tweak and streamline the bill to lessen any undue impact on landlords.  We thank them for that as most of the items are simply clairifications of how we already do business as landlords.

One important section is worth exploring in more depth.  There were many shady things happening with screening fees and how tenant applications were being reviewed prior to this law being enacted.  This law cleans up any areas for abuse or discrimination against the tenants.  Here are some of the major points (these only apply when a landlord charges an application fee):

• A landlord may not collect or hold a tenants’ application fee without providing a written receipt for the fee if the tenant’s asks for it.  This seems pretty easy and obvious.
• The landlord may not cash, use, or deposit the application fee until all prior applicants have either been screened and rejected or they have been offered the unit and they have declined to take the unit (did not sign a lease).  This is a significant change as it was a previous unwritten rule to screen one applicant and only take that money until you have exhausted all options with that applicant, then move onto the second application.  Some landlords were cashing all the application fees, running all the tenant applications and picking the best one.
• A landlord must return the application fee if the prior applicant is offer the unit and accepts; subsequently entering into a lease agreement.  You can’t keep the application fee.
• You must disclose to the tenant, in writing, prior to taking the application or fee the criteria that your rental decision will be based upon.  I have been doing this for many years as it was required in certain cities, but this becomes a statewide requirement.
• If you reject a tenant application, you must notify the applicant within 14 days of that rejection as well as identifying the criteria that the tenant failed to meet (you should be citing something on the above written application screening criteria).  If you are rejecting the applicant for something that is not on the screening criteria document, you must return all their application fee.
• A prospective tenant who materially provides false information or omits information on the application is liable for damages, plus a civil penalty of up to $500, plus court costs.  I am not sure how this one is going to be regulated or tracked, but it could be interesting if some applicant lies to you and you can prove it.

These are some small, but important changes to how we as landlords run out investment properties.  You should make sure you thoroughly understand these.