May 04, 2016
A. Tenant Credit and Background Check
Before entering into a lease agreement, it is essential to obtain information about the credit history of the prospective tenant(s) in order to evaluate and minimize the landlord’s potential risk. With most applicants, that can usually be ascertained by reviewing their credit report, as that will generally provide a good snapshot of their credit worthiness. However, there can be instances where an applicant will have very little or no information on their credit report, such as college students or young adults who haven’t developed a credit history. In those instances, it is advisable to require a co-signer or guarantor, such as a parent, in order to further protect the landlord’s interests.
Prior to pulling a credit report, it is recommended that the applicant’s written consent be obtained. Many lease application forms contain a provision authorizing the landlord to obtain a copy of the applicant’s credit report for use in evaluating their application. If not, a simple written statement to that effect, signed by the applicant(s), will suffice. It is also recommended that the landlord retain copies of
the application and credit report for all applicants, especially those who are denied housing, in a secure place for at least two years, in the event that complaints or actions are lodged under the Delaware Fair Housing Act or the Landlord Tenant Code.1 incorporates these prohibitions into the Landlord//Tenant Code.
When a credit report is not sufficient to determine the prospective tenant’s credit worthiness, the landlord should take additional steps to evaluate the application. While contacting the tenant’s current landlord may help, keep in mind that that landlord may be looking to rid themselves of a problem tenant and a “recommendation” may not be particularly sincere. Conversely, information may not necessarily be accurate if the current landlord and tenant presently have a dispute, which is the basis for the tenant seeking replacement housing. Also, information from former landlords may be limited by the terms of settlement agreements, as there can be instances where a landlord and tenant resolve a housing matter where the tenant will move out and the landlord agrees to provide a neutral reference, in theory, to not make it more difficult for the tenant to find a new rental unit. Lastly, there are also online resources to investigate a prospective tenant.
It is also important to keep in mind that the landlord does not have to absorb the cost of the credit report or background check. 25 Del. C. § 5514(d), as well as 25 Del. C. § 7008(d) relating to Mobile Homes, both provide:
“Where a tenant is required to pay a fee to determine the tenant's
credit worthiness, such fee is an application fee. A landlord may
charge an application fee, not to exceed the greater of either
10 percent of the monthly rent for the rental unit or $50, to
determine a tenant's credit worthiness. The landlord shall, upon
receipt of any money paid as an application fee, furnish a receipt
to the tenant for the full amount paid by the tenant, and shall
maintain for a period of at least 2 years, complete records of all
application fees charged and amounts received for each such fee.
Where the landlord unlawfully demands more than the allowable
application fee, the tenant shall be entitled to damages equal to
double the amount charged as an application fee by the landlord”.
Therefore, by charging an application fee, the landlord can offset the costs involved. However, compare § 5514 with 25 Del. C. § 5310, which prohibits “assurance money” and specifically provides that a landlord “shall not charge any prospective tenant, as a fee for any credit or other investigation, any more than the specific cost of such investigation”. In addition, the landlord is required to retain for 6
months records of each application by any prospective tenant. The Consumer Protection Unit of the Attorney General’s office is empowered to investigate all complaints related to assurance money and, if appropriate, issue cease and desist orders.
B. Inspections
Before a landlord can lawfully rent a unit to a tenant, it may be necessary to have a pre-rental inspection performed. A number of municipalities require that a rental property be inspected and approved prior to a tenant being installed. For example, the City of Newark and Town of Middletown require a pre-rental inspections. In addition, Newark and Dover require yearly inspections. A table providing
information on various municipalities in each of New Castle, Kent and Sussex Counties in included in the Appendix.
While there may be reluctance on the part of some landlords to have a pre-rental inspection performed, it is actually an effective way of limiting the landlord’s potential liability to a tenant, should they complain about conditions. For example, it serves to document that the unit was in code compliance at the time the new tenant took possession. In addition, 25 Del. C. § 5305 regarding landlord obligations for
maintenance and repair to the rental unit, which will be addressed in more detail later, specifically provides that “evidence of compliance with the applicable building and housing codes shall be prima facie evidence that the landlord has complied with this chapter or with any other chapter of Part III of this title (referring to the Code as a whole)”. Therefore, a pre-rental inspection may serve as a partial or complete defense to a later claim for a rent abatement by a tenant based on alleged conditions.
Even if a pre-rental inspection is not required, a documented walk through of the actual unit to which the tenant will be given possession is often invaluable. For one, it puts both parties on the same page as far as what the tenant will be receiving and what items within the unit the landlord may need to address. Second, it can help reduce distrust between the parties at the outset and set the stage for a good
relationship throughout the tenancy. Lastly, and perhaps most importantly for the landlord, it provides a much more accurate record of the condition of the rental unit at the time the tenant first took possession than the landlord’s or tenant’s later, and likely biased, recollection. Therefore, it is essential to have a checklist of items that the tenant will acknowledge as being acceptable, with any items to be addressed specifically identified. Photographs of the unit taken contemporaneously with the walk through are also highly recommended and can be a tremendous asset at trial in defending a later tenant claim of substandard and defective conditions.
C. Registration with Local Municipalities
Certain municipalities, including the City of Wilmington, City of Newark, City of New Castle and City of Dover, require that landlords register any rental unit. In addition, the New Castle County Code now requires landlords of rental properties within the unincorporated areas of New Castle County to register each unit and provide, among other information, emergency contact numbers. Landlords who
fail to comply with registration and other notification requirements are subject to fines, penalties and criminal or civil enforcement.
D. Recordkeeping
The importance of maintaining complete and accurate records cannot be overemphasized. A landlord must anticipate that any relationship with a tenant may dissolve to the point where litigation is necessary. In those instances, the party with the better records will generally be the party that prevails. As a result, documenting everything related to the tenancy is essential, from the original application, pre-tenancy
inspection or walk-through with photographs and, as will be discussed later, any written notices to or from the tenant. Likewise, if repairs are made during the course of the tenancy, the landlord must maintain copies of invoices for contractors, receipts for items purchased and, if appropriate, photographs of the work performed.
Aside from documenting the physical condition of the rental unit, the financial accounting of the tenancy must be complete and accurate. While handwritten ledgers can and are sufficient, there is really no excuse not to utilize computer software for that purpose. Programs such as Quickbooks, Peachtree Accounting and the like make it very fast and easy for landlords to enter and maintain up to date financial
records related to a tenant and the unit. If and when it is necessary to file a Summary Proceeding for Possession, it is very easy to print reports showing tenant payments, application of late fees, etc.
In addition to maintaining records on application fees, a landlord is also obligated to retain records relating to cash payments made by a tenant for rent. 25 Del. C. § 5501 requires a landlord to provide a receipt to a tenant for any cash payments within fifteen days of payment and maintain, for a period of three years, records of all cash receipts for rent.
E. Prepossession Agreements for Repairs and Assurances
If the parties agree before a tenant is to move in that any repairs are necessary, it is advisable for the landlord to effect those repairs as soon as possible. 25 Del. C. § 5303 provides that “the landlord shall supply the rental unit bargained for at the beginning of the term and shall put the tenant into full possession”. That means that the landlord has a statutory duty to provide the rental unit promised for the tenant’s full use and enjoyment at the time the tenant takes possession. If the landlord fails to do so, the tenant has the option to terminate the lease.
For example, if landlord fails to substantially conform to the rental agreement or comply with any code, statute, ordinance or regulation regarding maintenance or operation of the unit, the tenant may terminate within the first month if they have remained in possession in reliance on a promise to correct the condition (§ 5302(a)). Likewise, if the tenant remains in possession in reliance on such a promise to
correct and the same act or omission which constituted a prior non-compliance recurs within six months of a prior notice, the tenant may terminate on fifteen days notice. (§ 5302(b)). Lastly, “if there exists any condition which deprives the tenant of a substantial part of the benefit or enjoyment of the tenant’s bargain”, the tenant may notify the landlord and if not corrected within fifteen days, terminate the agreement and sue in Justice of the Peace Court. (§ 5302(c)). Simply stated, if the landlord makes any promises to repair that are reasonably relied upon by the tenant, the landlord must complete those repairs or run the risk that the tenant may lawfully terminate the lease agreement and sue for damages.
1 The Delaware Fair Housing Act, as codified at 6 Del. C. § 4600, et seq., makes it illegal to discriminate in the sale or rental of any dwelling to any person because of race, color, national origin, religion, creed, sex, marital status, familial status, age or handicap. Likewise, 25 Del. C. § 5116 further